Federal authorities have detained the founder of the scandal-plagued US startup Ozy Media on fraud allegations. The arrest of Carlos Watson occurred days after former corporate executive Samir Rao pled guilty to fraud charges.
Mr. Rao sought to defraud investors by impersonating a YouTube officially, according to a New York Times investigation that led to the shutdown of Ozy Media in 2021.
Mr. Watson allegedly “led a scheme to defraud investors” of millions of dollars, according to federal authorities.
Also, the United States Department of Justice and the Securities and Exchange Commission have initiated investigations into the corporation.
In 2013, Mr. Watson, a former Goldman Sachs banker, and MSNBC commentator started Ozy Media in California. The organization created podcasts, television series, events, and profiles of rising stars and developed trends with a left-leaning bias.
In 2020, it was valued at $159m (£132m).
According to court documents released this week, Mr. Watson was aware that Ozy Media was “swimming in debt,” yet he misled to investors about the company’s earnings and falsely claimed celebrities and high-profile companies had invested.
Sharon Osborne, the wife of rock legend Ozzy Osbourne, accused Mr. Watson of making false claims that the couple had invested in the business, telling CNBC in 2021, “this guy is the worst con artist I have ever seen.”
Mr. Watson was arrested on Thursday and is expected to be charged with conspiracy to commit securities fraud and conspiracy to commit wire fraud in federal court in Brooklyn, New York, according to the Wall Street Journal.
Mr. Watson’s attorney told NBC News that he was “very upset by today’s developments.”
Attorney Lanny Breuer stated,
“We engaged in a good faith, constructive communication with the authorities.”
“Given the department’s assertions that it promotes discourse, I do not comprehend today’s arrest of Carlos.”
Ozy Media’s decline began when The New York Times reported that Rao impersonated a YouTube executive on a call with Goldman Sachs, boasting about YouTube’s successful partnership with Ozy when the bank was exploring an investment.
Mr. Watson attributed Rao’s deceitfulness to his mental health issues. He stated that no harm was caused by Goldman Sachs’s final decision not to invest.
Prosecutors allege in court documents filed this week that Mr. Watson was present during the call and “texting Rao instructions on what to say,” despite previously denying to the public that he was there.
Prosecutors allege that Mr. Watson and Mr. Rao impersonated media firm executives “on many occasions” to conceal false representations made to investors.
Mr. Rao pleaded guilty to securities fraud conspiracy, wire fraud conspiracy, and identity theft on Tuesday, admitting that he misled investors and overstated the company’s finances.
According to federal court filings, the former head of staff of the corporation, Suzee Han, has also pled guilty to securities fraud conspiracy and wire fraud conspiracy.
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