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The founder of the US media start-up Ozy Media, who has been involved in many scandals, has been arrested on federal fraud charges.
A former company executive named Samir Rao pleaded guilty to fraud charges a few days before Carlos Watson was arrested.
Ozy Media closed in 2021, after 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 “had a plan to rob investors of millions of dollars.”
The company is also being looked at by the US Department of Justice and the SEC.
Mr. Watson started Ozy Media in California in 2013. He used to work at Goldman Sachs as a banker and host a show on MSNBC. The company made podcasts, TV shows, events, and profiles of new artists and trends that were more on the left side of things.
It was worth $159m (£132m) in 2020.
According to documents filed in federal court this week, 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 Osbourne, who is married to rock star Ozzy Osbourne, said that Mr. Watson lied when he said that the couple had invested in the business. She told CNBC in 2021, “This guy is the biggest crook I have ever seen.”
On Thursday, the Wall Street Journal reported that Mr. Watson had been arrested. He is likely to be charged with securities fraud conspiracy and wire fraud conspiracy in federal court in Brooklyn, New York.
A lawyer for Mr. Watson told NBC News that his client was “deeply disappointed by what happened today.”
The lawyer, Lanny Breuer, said they were being honest and helpful when talking with the government. But, since the department says it wants people to talk to each other, he says he doesn’t understand why Carlos was arrested today.
When the New York Times said that Rao had pretended to be a YouTube executive during a call with Goldman Sachs, Ozy Media’s problems began. During the call, Rao talked about YouTube’s good relationship with Ozy while the bank considered investing.
Mr. Watson said that Rao’s lying was caused by his mental health problems. But he also said that Goldman Sachs’ decision not to invest didn’t hurt anyone.
In court documents filed this week, prosecutors say 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 Watson and Rao pretended to be executives of media companies “more than once” to hide the lies they told investors when they were asked about them.
Mr. Rao pleaded guilty on Tuesday to working with others to commit securities fraud, wire fraud, and identity theft. He told the judge that he had 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, also admitted to securities fraud and wire fraud conspiracy.
Why did Ozy Media shut down in 2021?
The US media company Ozy Media has said it will shut down because of a growing dispute over how it does business.
It comes after the news that Ozy’s chief operating officer lied to potential investors during a conference call. The FBI is now looking into this claim and asking questions of the COO.
Some big advertisers stopped working with the company after that.
Marc Lasry, who was in charge of Ozy’s, and Katty Kay, who used to work for the BBC, have both quit their jobs.
Sharon Osborne, Ozzy Osbourne’s wife, said that Carlos Watson, the company’s CEO, lied when he said that the couple had invested in the business.
In an interview with CNBC in 2019, after he had settled a trademark dispute with the couple, Mr. Watson said these things.
These accusations are outrageous and almost hard to believe. But, unfortunately, in some parts of Silicon Valley, they need to be a part of a better way of doing business.
Here, it’s common to say that your business is bigger, more innovative, more successful, and better connected than it is. People refer to this as “hustle” or “hype.”
But “fake it until you make it,” as it’s sometimes called, has led to some of the biggest scandals in Silicon Valley.
In San Jose, the CEO and founder of Theranos is on trial. They are accused of doing something very bad with blood tests.
Most businesses sell dreams that can come true in the future. We now have computers and phones because of this. But only some companies take things too far.
Some of the things that have been said about Ozy Media are common in Silicon Valley.
It is 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 true, 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’s a visionary.