The founder of the scandal-plagued US media start-up Ozy Media has been arrested on federal fraud charges.
A former executive of the cmpany, Samir Rao, pleaded guilty to fraud charges a few days before Carlos Watson was arrested.
Ozy Media closed in 2021 after an investigation by the New York Times found that Mr. Rao had tried to trick investors by pretending to be a YouTube executive.
Federal prosecutors say that Mr. Watson “led a scheme to steal millions of dollars from investors.”
The US Department of Justice and the SEC are also looking into the company.
Mr. Watson started Ozy Media in California in 2013. He used to work as a banker for Goldman Sachs and host a show on MSNBC. The company made podcasts, TV shows, events, and profiles of rising stars and new trends that leaned to the left.
In 2020, it was worth $159m (£132m).
According to documents filed this week in federal court, Mr. Watson knew Ozy Media was “swimming in debt,” but he lied to investors about the company’s income and said celebrities and well-known companies had invested.
Sharon Osborne, married to rock star Ozzy Osbourne, said that Mr. Watson lied when he said the couple had invested in the business. In 2021, she told CNBC, “This guy is the biggest crook I have ever seen in my life.”
The Wall Street Journal broke the news that Mr. Watson was arrested on Thursday. He is expected to be charged with conspiracy to commit securities fraud and conspiracy to commit wire fraud in federal court in Brooklyn, New York.
An attorney for Mr. Watson told NBC News that his client was “deeply disappointed by what has happened today.”
The lawyer, Lanny Breuer, said they were talking with the government in good faith and helpful. And since the department says it wants people to talk to each other, he says he doesn’t understand why Carlos was arrested today.
Ozy Media’s problems started when the New York Times reported that Rao had pretended to be a YouTube executive during a call with Goldman Sachs. During the call, Rao talked up YouTube’s good relationship with Ozy while the bank was thinking about investing.
Mr. Watson said Rao’s mental health problems were to blame for the lie. However, he also said that it didn’t hurt anyone that Goldman Sachs didn’t decide to invest.
Prosecutors say in court documents filed this week that Mr. Watson was there during the call and was “texting Rao directions on what to say,” even though he had told the media he wasn’t there.
Prosecutors say that Mr. Watson and Mr. Rao posed as executives of media companies “more than once” to hide their false statements when asked by investors.
On Tuesday, Mr. Rao pleaded guilty to conspiring to commit securities fraud, wire fraud, and identity theft. He told a judge that he lied to investors and made the company’s finances look better than they were.
Federal court documents show that Suzee Han, the company’s former chief of staff, has also admitted to securities fraud and wire fraud conspiracy.
Ozy Media will shut down because of a scandal
US media company Ozy Media has said it will shut down because of a growing dispute over how it does business.
It comes after news that Ozy’s chief operating officer lied to potential investors during a conference call. The FBI is now investigating this claim and questioning the chief operating officer.
After that, some big advertisers cut ties with the company.
Marc Lasry, who ran Ozy’s, and Katty Kay, who used to work for the BBC, have also left their jobs.
Sharon Osborne, the wife of Ozzy Osbourne, said that the company’s CEO, Carlos Watson, lied when he said that the couple had invested in the business.
In 2019, after he had settled a trademark dispute with the couple, Mr. Watson said these things in an interview with the TV station CNBC.
These accusations are outrageous and almost impossible to believe. But, unfortunately, they need to be part of a better way of doing business in some parts of Silicon Valley.
Here, it’s common to say that your company is bigger, more innovative, more successful, and better connected than it is. People call it “hustle” or “hype.”
But “fake it until you make it,” as it’s sometimes called, has led to some of Silicon Valley’s biggest scandals.
The CEO and founder of Theranos are on trial in San Jose. They are accused of spectacular blood testing fraud.
Most businesses sell dreams that will come true in the future. Because of this, we have computers and phones. But there are a lot of companies that go too far.
Some of the things Ozy Media has been accused of are common in Silicon Valley.
It’s a classic of the genre to lie about how popular your content is, and many companies have been accused of doing this.
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But some other accusations are just crazy; if they are authentic, they could lead to legal action.
It’s the kind of story that will scare investors, who are always trying to figure out who’s a fraud and who is a visionary.