Ozy Media CEO is arrested; SEC says the company lied to investors
The scandal-plagued online content company Ozy Media is facing federal fraud charges brought by the U.S. Securities and Exchange Commission, which alleges that its leaders intentionally lied to investors about the company’s financial conditions while taking in tens of millions of dollars.
The company’s CEO, former television journalist Carlos Watson, is also facing federal criminal charges in New York and was arrested Thursday, the U.S. Department of Justice said in a statement.
Ozy Media, whose products include digital newsletters, video reports, podcasts and live events, did not immediately respond to an emailed request for comment.
The SEC said it had charged Watson, as well as the company’s former COO, Samir Rao, and former Chief of Staff, Suzee Han, with duping investors out of around $50 million from roughly January 2019 to September 2021. Federal prosecutors said the three repeatedly lied about the company’s financial results, debts and audience size, as well as who else might be investing in the company.
The company has raised more than $70 million in funding, according to Crunchbase.
The three defendants “routinely and purposely presented prospective investors with false financial information that grossly inflated Ozy Media’s annual revenue by at least 100 percent,” the federal financial regulator said in a statement. “Watson and Rao also allegedly solicited investments by repeatedly and falsely telling prospective investors that well-known and sophisticated investors would be investing in Ozy Media in some capacity.”
The SEC also said it had investigated a 2021 incident reported by the New York Times alleging that Rao impersonated a YouTube executive on a conference call in an attempt to make a potential investor believe Ozy, which relies heavily on video content, was receiving video licensing revenue from the tech giant when, in fact, it was not.
Watson allegedly attributed the episode to Rao having a “mental health crisis,” according to the complaint. The company shut down in October of that year before announcing it would reopen days later. Its website remains online.
Federal prosecutors have also charged Watson with “aggravated identity theft for his role in the impersonation of multiple media company executives in communications with Ozy’s lenders and prospective investors in furtherance of the fraud schemes.”
The DOJ said the three had lied about receiving offers to buy the company, as well as “the existence and terms of Ozy’s business contracts — going so far as to direct Ozy employees to create fake contracts with forged signatures to provide in due diligence.” Prosecutors said Watson, Rao and Han, on multiple occasions, impersonated media company executives to cover up their fraudulent activities when pressed by lenders or potential investors.
The SEC said Rao and Han had both consented to the entry of a judgment enjoining them from violating the charged provisions.
While Watson is facing criminal prosecution, the DOJ said Rao and Han had “previously pleaded guilty to charges relating to their roles in the scheme.”
If convicted, the DOJ said, Watson faces a mandatory minimum sentence of two years in prison, with a maximum sentence of 37 years.