Ozy Media CEO Carlos Watson Found Guilty on Multiple Fraud Charges in Multi-Million Dollar Scheme

Ozy Media founder Carlos Watson speaks onstage during OZY Fest 2018 in New York City, on July 22, 2018. Matthew Eisman/Getty Images for Ozy Media

A New York jury found embattled Ozy Media Inc. CEO Carlos Watson guilty of three counts of fraud in a multi-million dollar fraud scheme on Tuesday, July 16, the U.S. Department of Justice (DOJ) for the Eastern District of New York said in a post on X.

Charges against Mr. Watson, the founder and CEO of the company and former MSNBC personality, were unsealed in February 2023 with the DOJ charging him with conspiracy to commit securities fraud, conspiracy to commit wire fraud, and aggravated identity theft for the impersonation of several media executives.

The Justice Department said the charges came as part of a broader scheme orchestrated by Mr. Watson and associates to defraud investors and lenders out of tens of millions of dollars by presenting false and misleading information about the company’s financial status and business operations.

Mr. Watson pled not guilty to the charges in court in February of last year after federal agents arrested him at a Manhattan hotel.

His arrest followed guilty pleas earlier in the month by two top executives—including Ozy’s then-chief operating officer, Samir Rao, who prosecutors said impersonated a YouTube executive during a pitch to Goldman Sachs, a potential investor.

The trio were also named together in charges by the Securities and Exchange Commission last year, in which the agency accused them of “defrauding investors of approximately $50 million through repeated misrepresentations concerning the company’s basic financial condition, business relationships, and fundraising efforts.”

The SEC said Mr. Rao and Ms. Han entered judgements to settle their cases at the time, while Mr. Watson’s separate trial from the SEC’s charges was stayed pending the criminal trial in which he was found guilty this week.

Mr. Watson faces a mandatory minimum sentence of two years and a maximum of 37 years in prison, according to the Justice Department.

Ozy Media was founded in 2012 and launched the next year with a website and daily newsletters, according to the indictment.

The company began fumbling in its digital business around 2015 and moved toward television content and a live festival known as “Ozy Fest” in Central Park which included A-list musicians and public figures such as then-Vice President Joe Biden and RuPaul.

The company began taking on large amounts of debt in 2018 to survive, according to the indictment, which ultimately led to the fraudulent activity.

The company announced they were shutting down in October 2021 before later stating they had reversed the decision.

Government’s Investigation

According to a statement from the Department of Justice announcing the indictment and arrest of Mr. Watson in 2023, the agency said investigations resulted in finding that between 2018 and 2021, Mr. Watson and his co-conspirators, including Mr. Rao and Chief of Staff Suzee Han, engaged in a series of fraudulent activities.

They allegedly falsely inflated Ozy’s financial performance, audience size, and business partnerships to lure investors and secure loans—which involved creating fake contracts, fabricating financial documents, and lying about the company’s debt levels and revenue projections.

To further their deception, Mr. Watson and Mr. Rao impersonated executives from well-known media companies during negotiations with potential investors and lenders.

For example, in December 2019, they sent a fake signed contract to a bank to secure a loan, falsely claiming it represented revenue from a second season of an Ozy television show.

When the then-Chief Financial Officer (CFO) of Ozy refused to participate in this fraud and resigned, Mr. Rao, with Mr. Watson’s approval, sent the forged contract himself.

In another instance, Mr. Watson and Mr. Rao tried to secure a $45 million investment by claiming that a major online video service had paid Ozy nearly $6 million for content.

To back this claim, Mr. Rao impersonated a media executive from the video service during a call with the financial institution, using a voice-altering application to mask his identity while Watson fed him instructions.

Mr. Watson’s fraudulent activities came to light when discrepancies were discovered during due diligence processes, according to the Justice Department.

This led to Mr. Watson’s arrest and the unsealing of the indictment, the department added in the statement at the time.

The Associated Press contributed to this report.