Carlos Watson, CEO of Ozy Media, leaves the U.S. federal court in Brooklyn after being arrested and charged with fraud in New York City, New York, U.S., February 23, 2023.
David Dee Delgado | Reuters
Ozy Media and founder Carlos Watson were convicted of fraud by a federal jury in Brooklyn on Tuesday in a case in which they were accused of lying to investors about the now-defunct startup’s finances and sham deals with Google and Oprah Winfrey. Watson, a former news anchor and investment banker, and Ozy were charged with securities fraud and wire fraud.
Federal prosecutors allege that Watson and his California news and entertainment company falsified information about Ozy’s finances and the size of his audience, fabricated contracts and inflated profit projections to woo investors.
Ozy was founded in 2013, but went bankrupt in 2021 after news reports questioned its viewing figures. It also emerged that a top executive had posed as a YouTube executive during a call with bankers from Goldman Sachs, claiming the streaming site had agreed to pay for exclusive rights to an Ozy show.
Watson had pleaded not guilty. His lawyer told jurors he was betrayed by agents who acted on their own and kept him in the dark about their misconduct. The verdict follows a six-week trial in which two former Watson agents testified, having pleaded guilty to fraud. They told jurors they conspired with Watson to cover up Ozy’s crippling debts, meager cash reserves and slow growth.
Ozy went bankrupt shortly after The New York Times reported on former COO Samir Rao’s impersonation of the YouTube CEO. Watson denied involvement in the incident, though prosecutors said contemporaneous chat logs showed he coached Rao on what to say. YouTube CEO Alex Piper and Google CEO Sundar Pichai testified on behalf of the government, saying they never made deals with Ozy or considered buying it at any price, contrary to Watson’s claims to investors.
Prosecutors say Watson assured investors that Ozy was thriving, even though cash reserves had dwindled to $19,000 in 2018 as the company struggled to pay rent, wages and other basic expenses.
Ozy Media CEO Carlos Watson sits during a hearing after he and the company were criminally charged with plotting to defraud investors of tens of millions of dollars by misrepresenting the company’s debt, financial performance and audience size. The hearing takes place at a courthouse in Brooklyn, New York, U.S., February 23, 2023. Here is a sketch of the courtroom.
Jane Rosenberg | Reuters
Watson testified in his own defense for several days. He said prosecutors’ view of Ozy’s finances was simplistic and failed to appreciate the nuances of media industry dealmaking. He also blamed negative press coverage for Ozy’s downfall.
During cross-examination, Watson was at times evasive about the conflicting revenue figures Ozy provided to investors.
He also refused the prosecutor’s request to break down Ozy’s annual income into cash rather than future potential income.
“I never thought about it that way and our investors didn’t think about it that way either,” he said.