Founder of Ozy Media Carlos Watson Arrested & Charged for Investment Fraud, Raised More than $50 Million Investments from Investors Including Steve Jobs Wife Laurene Powell Jobs, German Media Giant Axel Springer, Billionaire & Private Equity Founder Marc Lasry & Ford Foundation
25th February 2023 | Hong Kong
The founder of Ozy Media Carlos Watson (Age 53) had been arrested & charged for investment fraud, raising more than $50 million investments from prominent investors including Steve Jobs wife Laurene Powell Jobs, German media giant Axel Springer, billionaire & private equity founder Marc Lasry (Avenue Capital, co-owner of NBA team Milwaukee Bucks) & Ford Foundation. The United States prosecutors has alleged Carlos Watson had Carlos Watson defrauded Ozy’s potential investors, potential acquirers, lenders and potential lenders by misrepresenting the company’s audience numbers and financial results. Former Ozy Media COO Samir Rao (Age 36) and Chief of Staff Suzee Han (Age 29) had also been arrested and had pleaded guilty to fraud charges earlier in February 2023. See below for United States Securities & Exchange Commission (SEC) and United States Federal court charges.
“ Founder of Ozy Media Carlos Watson Arrested & Charged for Investment Fraud, Raised More than $70 Million Investments from Investors Including Steve Jobs Wife Laurene Powell Jobs, German Media Giant Axel Springer, Billionaire & Private Equity Founder Marc Lasry & Ford Foundation “
1) United States SEC Charges Ozy Media and its CEO Carlos Watson with Widespread Scheme to Defraud Investors
Former COO and chief of staff also charged in $50 million fraud
23rd Feb 2023 – The Securities and Exchange Commission today charged media and entertainment company Ozy Media Inc., its CEO Carlos R. Watson, Jr., its former COO Samir Rao, and its former Chief of Staff Suzee Han with defrauding investors of approximately $50 million through repeated misrepresentations concerning the company’s basic financial condition, business relationships, and fundraising efforts. Rao and Han have agreed to resolve the charges against them. According to the SEC’s complaint, from at least January 2019 through September 2021, the defendants routinely and purposely presented prospective investors with false financial information that grossly inflated Ozy Media’s annual revenue by at least 100 percent. Watson and Rao also allegedly solicited investments by repeatedly and falsely telling prospective investors that well-known and sophisticated investors would be investing in Ozy Media in some capacity.
The SEC’s complaint further alleges that Watson and Rao orchestrated a scheme in which Rao impersonated an executive from YouTube in an effort to support Ozy Media’s false claims to a prospective investor at the time that the company was receiving licensing revenue from YouTube when it was not. According to the SEC’s complaint, when the prospective investor discovered the ruse, Watson falsely attributed Rao’s impersonation to Rao suffering from a “mental health crisis.” He made these claims to both the prospective investor and Ozy Media’s Board of Directors. “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. “This matter underscores that we will hold anyone accountable, even well-known media personalities, for misrepresentations that impact investors.”
The SEC’s complaint, filed in the U.S. District Court for the Eastern District of New York, charges the defendants with violations of the anti-fraud provisions of the federal securities laws and related rules. The SEC seeks injunctive relief and civil penalties against all defendants, officer and director bars against Watson and Rao, and disgorgement with prejudgment interest against Ozy Media and Watson.
Rao has consented to the entry of a judgment enjoining him from violating the charged provisions and from serving, for a period of ten years, as an officer or director of a publicly traded company, with civil monetary penalties to be determined by the court at a later date. Han has consented to the entry of a judgment permanently enjoining her from violating the charged provisions, with civil monetary penalties to be determined by the court at a later date. The judgments are subject to court approval.
In a parallel action, the U.S. Attorney’s Office for the Eastern District of New York today announced criminal charges against Ozy Media, Watson, Rao, and Han.
The SEC’s ongoing investigation was conducted by Christine D. Ely, Karolina Klyuchnikova, Lisa Knoop, Lee A. Greenwood, and Alison R. Levine of the SEC’s New York office, under the supervision of Sheldon L. Pollock. The litigation will be led by Ms. Klyuchnikova and Ms. Ely. The SEC appreciates the assistance of the Federal Bureau of Investigation and the U.S. Attorney’s Office for the Eastern District of New York.
2) United States Federal Court – Ozy Media and Its Founder Carlos Watson Indicted in a Years-Long Multi-Million Dollar Fraud Scheme
Watson and Ozy Senior Executives Allegedly Defrauded Investors of Tens of Millions of Dollars Through Fraudulent Misrepresentations and Impersonated Media Company Executives During Negotiations
23rd Feb 2023 – An indictment was unsealed this morning in federal court in Brooklyn charging OZY Media Inc. (Ozy), a media and entertainment company headquartered in Mountain View, California, and its founder and Chief Executive Officer, Carlos Watson, with conspiracy to commit securities fraud and conspiracy to commit wire fraud in connection with a scheme to defraud Ozy’s investors and lenders by making material misrepresentations about Ozy’s financial and business assets. Watson is also charged with aggravated identity theft for his role in the impersonation of multiple media company executives in communications with Ozy’s lenders and prospective investors in furtherance of the fraud schemes.
Watson was arrested this morning and will be arraigned later today before United States Magistrate Judge Cheryl L. Pollak. If convicted, Watson faces a mandatory minimum sentence of two years’ imprisonment and a maximum sentence of 37 years’ imprisonment.
Watson’s co-conspirators Samir Rao, Ozy’s Chief Operating Officer, and Suzee Han, Ozy’s Chief of Staff from June 2019 to October 2021, previously pleaded guilty to charges relating to their roles in the scheme. The U.S. Securities and Exchange Commission (SEC) is taking concurrent enforcement action.
Breon Peace, United States Attorney for the Eastern District of New York, and Michael J. Driscoll, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), announced the arrest and indictment.
“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,” stated United States Attorney Peace. “Investment fraud undermines confidence in our nation’s markets and investors and makes it harder for honest businesses to compete. 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.”
“As the indictment today alleges, Watson repeatedly attempted to entice both investors and lenders through a series of deliberate deceptions and fabrications. The FBI and our partners in law enforcement will hold any individual willing to defraud investors and financial institutions accountable in the criminal justice system,” stated Assistant Director-in-Charge Driscoll.
The Scheme
As alleged in the indictment and court documents, Ozy is a media and entertainment company whose businesses include digital newsletters, television production, podcasts, and live events, the most prominent of which is a live festival known as “Ozy Fest.” Watson founded Ozy in 2012 and has served as the company’s Chief Executive Officer since its inception.
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. In addition, Watson and his co-conspirators lied to prospective investors about who else might be investing in Ozy, the existence and size of acquisition offers received by Ozy, the existence and timing of “Series C” and “Series D” financing rounds by Ozy, and the existence and terms of Ozy’s business contracts — going so far as to direct Ozy employees to create fake contracts with forged signatures to provide in due diligence. On multiple occasions, when faced with questions from lenders or potential investors, Watson and his co-conspirators assumed the identities of and impersonated actual media company executives to cover up their prior fraudulent misrepresentations.
Forged Cable Television Contract and Impersonation of Media Executive
In December 2019, Watson and his co-conspirators attempted to induce a bank to lend Ozy money based on misrepresentations and omissions about Ozy’s business. Watson and his co-conspirators sought to secure the loan with anticipated revenues from a second season of an Ozy television show. However, the contract between Ozy and the show’s cable network for the second season of the show was still under negotiation. To induce the bank to make the loan sooner, Watson directed Ozy’s then-Chief Financial Officer (CFO) to send the bank a fake signed contract between Ozy and the cable network purporting to be for the second season. When the then-CFO refused, Rao, with Watson’s approval, sent the fake contract — which contained terms favorable to Ozy and a forged signature — to the bank, copying the then-CFO. Later that day, the then-CFO emailed Watson and Rao to say that she was resigning effective immediately. She explained, “this . . . is illegal. This is fraud. This is forging someone’s signature with the intent of getting an advance from a publicly traded bank.” She continued, “To be crystal clear, what you see as a measured risk — I see as a felony.”
In subsequent months, Watson and his co-conspirators continued to attempt to induce the bank to lend Ozy several million dollars based on misrepresentations and omissions, including regarding the expected revenue from the second season of the Ozy television show. During these discussions, the bank requested to speak to a representative of the cable network. To conceal the lies about Ozy’s relationship with the cable network and the status and terms of their agreement, Rao, with Watson’s approval, created a fake email address in the name of an actual executive of the cable network, which Rao used to impersonate the executive and communicate with the bank about the potential loan.
Attempted Fraudulent Investment and Impersonation of Another Media Executive
From approximately November 2020 through February 2021, Watson and his co-conspirators attempted to induce a financial institution to invest up to $45 million in Ozy by means of material misrepresentations and omissions regarding Ozy’s historical and projected financial results, debts, and business relationships. Had the full $45 million investment occurred as intended, $6 million of the $45 million would have been paid to Watson personally.
As part of its due diligence process, the financial institution asked Watson and Rao to arrange a meeting with someone from a well-known online video service that Watson and his co-conspirators claimed had paid Ozy nearly $6 million in licensing revenue for “The Carlos Watson Show.” This was another misrepresentation — Ozy was never paid by this online video service for Ozy content. Because Ozy did not in fact have any business relationship with the online video service, Watson and Rao agreed that Rao would impersonate a media executive at the online video service in communications with the financial institution. On or about January 28, 2021, Rao, with Watson’s agreement, created a fake email address in the name of the media executive, which he used to correspond with representatives of the financial institution.
On or about February 2, 2021, Rao had a call with employees of the financial institution during which he impersonated a media executive from the online video service using a voice alteration application that he downloaded onto his cellular telephone to mask his voice during the call. During the call, Watson was in the same room as Rao, and texted Rao instructions about what to say and what not to say on the call. Shortly after the call, one of the employees of the financial institution contacted the actual media executive of the online video service, who confirmed that he had not been on the call and that the online video service had no role in the production of The Carlos Watson Show. When members of the financial institution later spoke with Watson, he falsely claimed that Rao had acted alone and as a result of a mental breakdown.
The charges in the indictment are allegations, and the defendants are presumed innocent unless and until proven guilty. The government’s case is being handled by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Jonathan Siegel, Dylan A. Stern, and Gillian Kassner are in charge of the prosecution, with assistance from Paralegal Specialist Jake Menz.
The Defendants:
- CARLOS WATSON
- Age: 53
- Mountain View, California
- OZY MEDIA, INC.
- Mountain View, California
- E.D.N.Y. Docket No. 23-CR-82 (EK)
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