Carlos Watson, the founder and CEO of Ozy Media, has been arrested in New York and charged with two counts of fraud and one count of identity theft. The Wall Street Journal first reported news of his arrest. The action by law enforcement officials comes after years of scrutiny of Watson and the high-profile, rapid collapse of his media company.
He is accused of scheming to defraud investors by making misrepresentations about the company’s financial and business assets, and impersonating several media company executives when dealing with lenders and potential investors.
“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 in a statement.
Watson publicly presented himself as a well-connected, charismatic CEO. But two years ago, that all came crumbling down, following a report in the New York Times that former chief operating officer Samir Rao had impersonated a YouTube executive during a conference call with Goldman Sachs, which was considering a $40 million investment in the company.
That led to an investigation by federal officials. And within five days of that story’s publication, Watson shut Ozy down completely, with reporters’ interview notes in Google Drive, along with emails, Slack messages and more disappearing, Fortune previously reported. Three days later, the story would take an even odder turn, when Watson showed up on Today, announcing plans to relaunch Ozy and asking employees to come back.
Watson’s arrest on Thursday follows a guilty plea on Tuesday from Rao, who admitted to fraud and identity theft, saying he had made misleading statements to investors and inflated the company’s financial performance between 2018 and 2021. He entered the plea under a John Doe pseudonym with the court’s permission, as the Brooklyn U.S. attorney’s office continued to investigate Ozy, the Journal reported.
Another former Ozy executive pleaded guilty on Feb. 14 to fraud conspiracy charges.
A questionable history
Ozy’s fall was rapid, and the company seemingly played it fast and loose long before it shuttered.
For instance, in July 2019, Watson went on CNBC to announce that his friends Ozzy and Sharon Osborne had invested in his media startup. As it happens, they were anything but friends and had never invested. They had, in fact, sued Watson recently over the name of a festival the company was hosting in Central Park.
“This guy is the biggest shyster I have ever seen in my life,” said Sharon Osbourne at the time. “He’s insane.”
Watson later clarified that the Osbournes were offered shares of Ozy Media as part of the lawsuit settlement.
A former employee told Fortune in 2021 that Watson was “the master of maneuvering around questions and not giving an exact answer.”
Newsletters from the Ozy were sent to people who had never subscribed. And former Ozy deputy editor Kate Crane told Fortune about a conversation in 2015 with Ozy’s then head of audience in which she found out that traffic data given to investors and staff “didn’t line up” with company data.
Despite that, the digital outlet was a favorite of Silicon Valley, with investments from Axel Springer, Lauren Powell Jobs’s Emerson Collective, SuRo Capital, and former Ozy chair and billionaire venture capitalist Marc Lasry. By April 2020, the company had raised $83 million, according to PitchBook Data (as quoted by the Wall Street Journal).
In 2020, Watson told Axios the company brought in $50 million in revenue and achieved profitability—and reportedly boasted it would be valued at $5 billion by 2025.
Employees, at the time, were skeptical of Ozy, but say they had no idea how deep the problems were.
“I knew that there was cutting corners and biting off more than they could chew, and that they had shoddy business practices. But did I know that they were lying out their mouths about everything? No,” Joshua Eferighe, a former writer at Ozy who left, told Fortune in 2021.
The company had reportedly been talking about bringing back its Ozy Fest event series in the past few weeks. The status of that plan, following Watson’s arrest, is unclear.
“We are really disappointed,” Lanny Breuer, Watson’s lawyer, told the WSJ when asked about his client’s arrest. “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.”
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