The founder of the startup Ozy Media was arrested on Thursday on fraud charges, more than a year after the troubled digital company shut down after losing millions of dollars.
Authorities say Carlos Watson misled investors and lenders to prop up the financially struggling company, conspired to commit securities fraud and wire fraud, and committed identity theft with his role in the impersonation of several media executives.
Police arrested Watson at a Manhattan hotel. Earlier this month, two of the company’s top executives pleaded guilty to fraud charges, including Ozy’s former chief operating officer, Samir Rao, who allegedly impersonated a YouTube executive during a pitch to a potential investor.
Between 2018 and 2021, Watson and his business partners attempted to defraud investors and lenders of “tens of millions of dollars through fraudulent misrepresentations and omissions” about the company’s debts and other key financial information, authorities say.
Watson’s attorney, Lanny Breuer, was critical of the decision to arrest his client.
“We are really disappointed,” he told the Wall Street Journal. “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.”
Watson and Rao, both Harvard alumni and former Goldman Sachs employees, founded the company in 2013. Trouble came in 2021 when a New York Times report cast doubt on the company’s claims that it had tens of millions of viewers and subscribers. The story also described an incident in which an Ozy official masqueraded as a YouTube executive in a failed effort to get Goldman Sachs to infuse money into the struggling enterprise.
The report prompted several departures and the company announced it was shutting down in fall 2021.
“As alleged, Carlos Watson is a conman whose business strategy was based on outright deceit and fraud,” said Breon Peace, the US attorney for the Brooklyn-based eastern district of New York. “He ran Ozy as a criminal organization rather than as a reputable media company.”
Michael J Driscoll, the assistant director in charge of the FBI’s New York field office, said Watson “repeatedly attempted to entice both investors and lenders through a series of deliberate deceptions and fabrications”.
Watson and his colleagues pretended to be other media executives to cover up earlier misrepresentations on multiple occasions, the US attorney’s office said.