Ozy Media co-founder Carlos Watson, a former personality at both MSNBC and CNN, was arrested on fraud charges Thursday.
Watson, 53, is charged with conspiracy to commit securities fraud and conspiracy to commit wire fraud related to a "scheme to defraud Ozy’s investors and lenders" by misrepresenting Ozy’s financial and business assets. He is also charged with aggravated identity theft for his role in former Ozy executive Samir Rao's infamous phone call.
Ozy, which launched in 2013 and has been troubled for years, published left-leaning, youth-focused content about current events and liberal culture. The media brand’s website boasts about spotlighting "Alexandria Ocasio Cortez when she was working as a bartender in the Bronx" and states part of its mission is to "Reset America." The embattled company was best known for its Ozy Fest events.
Watson, who is expected to be arraigned in a Brooklyn, N.Y., federal court, was arrested after Rao pleaded guilty to fraud charges in a "secretive federal court proceeding," the Wall Street Journal first reported. The co-founders have long been suspected of misleading potential investors and advertisers.
Ozy first came under fire in 2021 when The New York Times reported Rao impersonated a YouTube executive during a fundraising call with Goldman Sachs honchos. Rao stepped down shortly after his impersonation was made public in the Times report about a "$40 million conference call gone wrong."
The Times also put a spotlight on discrepancies regarding the size of Oxy’s audience and the company has been under federal investigation by the U.S. government ever since. Goldman Sachs did not invest in Oxy.
"We are really disappointed," Waston’s lawyer, Lanny Breuer, told the Journal. "We have been acting in good faith and believe we had a constructive dialogue with the government and are shocked by the actions this morning."
Ozy did not immediately respond to a request for comment.
"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," U.S. Attorney Breon Peace said.
"Investment fraud undermines confidence in our nation’s markets and investors and makes it harder for honest businesses to compete," Peace continued. "Our Office and the Department of Justice have made it clear that prosecuting corporations and their corrupt executives who flagrantly violate the law are top priorities."
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Rao pleaded guilty Tuesday in Brooklyn federal court to fraud and identity theft charges for his role in the alleged scheme. Watson, who was a Goldman Sachs banker and cable news anchor before co-founding Ozy, previously blamed Rao’s conduct on a mental-health issue.
Another former Ozy executive, Suzee Han, has also pleaded guilty to fraud conspiracy charges.
"Between approximately 2018 and 2021, Watson and his co-conspirators, including Rao and Han, orchestrated a scheme to defraud investors in and lenders to Ozy of tens of millions of dollars through fraudulent misrepresentations and omissions about key aspects of Ozy’s business, including Ozy’s financial results, debts, and audience size," a court filing states.
Ozy is "a diverse, global and forward-looking media and entertainment company focused on ‘the New and the Next,’" according to its website. Ozy bills itself as a "space for fresh perspectives, introduces you to rising stars and breakthrough trends, and offers new takes on everything from news and culture to technology, business, learning and entertainment."
Waston hosted a show on Oxy in addition to serving as its chief executive.
Citing startup-research firm PitchBook Data, the WSJ reported that Ozy "had raised $83 million as of April 2020, and at the time had a valuation of $159 million."
Earlier this month, Semafor reported that Watson attempted to raise money for Oxy by declaring it was a "hip" media brand for young people. Semafor reported that Watson claimed the brand has "millions of fans," but the company’s YouTube channel had less than 5,000 subscribers at the time of the co-founder’s arrest.
Watson previously had roles at CNN and MSNBC; he also made guest appearances on Fox News early in his career. He was also a regular on NPR at one point. Watson was also appointed to NPR’s board in 2016, but resigned when Oxy was accused of misleading advertisers and investors.
