Ozy Media founder and CEO Carlos Watson has been arrested on fraud charges.
Watson’s arrest comes after his former Ozy Media partner, Samir Rao, pleaded guilty to fraud charges and agreed to cooperate with federal officials. In a related but separate move, the SEC charged Watson, and Ozy with defrauding investors of $50 million.
“As alleged, Carlos Watson is a con man whose business strategy was based on outright deceit and fraud – he ran Ozy as a criminal organization rather than as a reputable media company,” said U.S. Attorney Breon Peace said in a statement.
In a statement to The Hollywood Reporter, Watson’s attorney Lanny Breuer said “I am deeply disappointed by the events of today.”
“We were engaged in a good faith and constructive dialogue with the Government,” he added. “Given the Department’s claims of promoting such dialogue, I do not understand the dramatic decision to arrest Carlos today.”
According to a copy of the criminal charges, Watson, Rao and other Ozy executives “engaged in a scheme to defraud OZY’s investors, potential investors, potential acquirers, lenders and potential lenders through material misrepresentations and omissions about, among other things, OZY’s historical and projected financial results, OZY’s debts, OZY’s audience numbers, the identities of OZY’s investors and the sizes of their investments, the existence and timing of investment rounds, the identities of OZY’s business partners, the existence and terms of key contracts and purported offers to purchase OZY by high-profile corporations.”
If convicted, Watson would face a minimum sentence of 2 years, and a maximum sentence of 37 years in prison.
The SEC charges made similar claims.
“We allege that over the course of several years, the defendants raised approximately $50 million from victim investors on the basis of fraudulent documents and repeated misrepresentations, including, at least in one case, falsely impersonating a potential business partner during a meeting with an investment bank,” said Gurbir S. Grewal, the SEC’s director of enforcement, in a statement. “This matter underscores that we will hold anyone accountable, even well-known media personalities, for misrepresentations that impact investors.”
Watson’s arrest comes more than a year after Ozy Media’s downfall, and just as Watson was planning to resurrect the brand. Earlier this month Watson appeared at an advertising event sponsored by global marketing giant IPG, seeking sponsors for an upcoming edition of OzyFest.
Ozy’s downfall began in fall 2021, when then-New York Times media columnist Ben Smith revealed that Rao impersonated an executive from YouTube in a fundraising meeting with Goldman Sachs (the indictment said that Watson was texting Rao what to say during the virtual meeting). Subsequent stories suggested Watson also lied to the executive producer of his YouTube show by saying it would air on cable channels owned by A+E Networks, and that Watson had made false claims about Ozy’s reach and traffic.
Ozy’s TV and podcast deals fell apart after the stories, and the company shut down in October 2021 (though Watson would go on to tease its possible resurrection).
In fact, Ozy’s TV deals play a critical role in the indictment. Ozy was in talks to sell itself to a digital media publisher for $225 million (Watson said after the Times article came out that he had once been in talks with BuzzFeed about an acquisition, though it is not clear that it is the same company), but the digital media company asked to see copies of Ozy’s TV contracts.
However, Watson and Ozy executives “had previously misrepresented to Media Company 1 that some of the contracts contained terms more favorable to OZY than the actual terms of the contracts. As a result,[Ozy executives] with Watson’s knowledge, fraudulently altered the contracts for two of OZY’s television shows to make the contracts’ terms appear to be significantly more favorable to OZY.”
Watson also allegedly created a fake signed contract for the second season of one of Ozy’s TV shows, despite knowing that the deal had not closed, forcing the company’s CFO to resign and explain in an email “to be crystal clear, what you see as a measured risk — I see as a felony.”
Watson, a former MSNBC anchor and CNN contributor, hosted many of Ozy’s shows, including The Carlos Watson Show, which ran on YouTube. Ozy also had TV production deals with OWN, PBS, and A+E Networks for a number of programs.
The indictment also said that Rao impersonated an executive at an unnamed cable network when the company was seeking to secure a loan from a bank.
Updated 9:50 AM with details from the SEC indictment.
