UPDATED with sentence: Carlos Watson, the founder and former CEO of Ozy Media, was sentenced to 116 months, or nearly ten years, in prison for conspiracy to commit securities fraud, conspiracy to commit wire fraud and aggravated identity theft in an unusual case that briefly captivated the media world. Watson launched the digital lifestyle and news site in 2012.
The term was handed down this week by United States District Judge Eric R. Komitee in federal court in Brooklyn following Watson’s conviction in July after an eight-week trial. While hefty, it was well below the 17 years that prosecutors had requested. Additional penalties of forfeiture and restitution from Ozy Media will be imposed at a later date.
The trial showed that between 2018 and 2021 Watson and Ozy Media co-conspirators orchestrated a scheme to defraud investors out of tens of millions of dollars through fraudulent misrepresentations and omissions about Ozy’s financial performance, including revenue, cash on hand and profit, ongoing business relationships with celebrities, acquisition prospects from high- profile technology and media corporations, contract negotiations and other corporate metrics.
Court filing showed that Watson and his co-conspirators, who were being tried separately, 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 financing rounds, and the existence and terms of Ozy’s business contracts, directing Ozy employees to create fake contracts with forged signatures to provide in due diligence.
One of the strangest claims was that 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.
In particular, Ozy co-founder and chief operating officer Samir Rao had misrepresented himself on a call with Goldman Sachs by pretending to be a YouTube executive, Alex Piper. The idea was to put Ozy in a positive light as it sought an investment from the bank.
“Watson’s scheme caused actual investor losses in excess of $60 million and intended to deprive potential investors of hundreds of millions more on the basis of his and his co-conspirators’ lies and misrepresentations,” said the U.S. Attorney for the Eastern District of New York in a statement, announcing the sentence.
“Carlos Watson orchestrated a years-long, audacious scheme to defraud investors and lenders,” it said.
“His incessant and deliberate lies demonstrated not only a brazen disregard for the rule of law, but also a contempt for the values of honesty and fairness that should underlie American entrepreneurship. On far too many occasions, Watson chose deceit over candor, grasping for the illusion of business success and personal acclaim at any cost.”
PREVIOUSLY: A jury in federal court in Brooklyn on Tuesday found Ozy Media founder and CEO Carlos Watson guilty of securities fraud, identity fraud and other charges that carry a penalty of up to 37 years in prison.
Sentencing is in November.
The verdict marks the end of a two-month trial for Watson, who founded the digital news and lifestyle startup in 2012. It seemed to be doing fairly well, a façade that exploded in 2021, when an article in the New York Times revealed that Ozy co-founder and chief operating officer Samir Rao had misrepresented himself on a call with Goldman Sachs by pretending to be a YouTube executive, Alex Piper. The idea was to put Ozy in a positive light as it sought an investment from the bank.
The executives lied to Goldman Sachs, saying giant YouTube wanted to buy the rights to The Carlos Watson Show.
Watson was also charged with misrepresenting the company’s finances and audience numbers to backers and investors.
The revelations were followed by a criminal indictment and Watson’s arrest in February 2023. The site, which had been up and down after the NYT story, shuttered after that.
“We decided that I would fake the reference call and pretend to be Alex,” Rao said on the stand, according to news reports today.
Rao and former chief of staff Suzee Han both pleaded guilty to charges last year and are cooperating with the government. They were named alongside Watson in a separate SEC lawsuit.
