BROOKLYN (CN) — Ozy Media founder Carlos Watson took the witness stand Monday, denying prosecutors’ accusations he repeatedly misrepresented the now-shuttered digital media company’s finances to investors and conspired to impersonate other media company executives in furtherance of the scheme.
“Mr. Watson, did you conspire to commit securities fraud?” Ronald Sullivan Jr., his attorney, asked.
“I did not,” Watson said, saying the same for the other charges against him, which include aggravated identity theft and conspiracy to commit wire fraud.
Watson denied accusations Monday that he asked investors for Series C funding without the company's board of directors’ official approval. Series C funding, the last round of funding start-up companies go through, typically indicates that a company has been successful, contrasting with testimony from former executives who said that the Ozy's financial situation was "pretty dire" in 2019.
Prosecutors claim in the 42-page indictment that Watson, together with co-conspirators Samir Rao and Suzee Han, misrepresented the timing of the Series C round and induced investors to transfer millions of dollars to Ozy in exchange for shares that did not exist at the time.
“The board did not authorize issuance of Series C shares until September 2019, and the Series C did not actually close until later that month,” prosecutors say in the indictment.
But Watson, donning a navy blue suit and white button-up, claimed Monday that the Series C funding had a “rolling close” in which investors were able to buy shares at different times from the board’s first approval of the round in August 2016 to its final approval in September 2019.
In separate testimony last month, Rao told jurors that the board did not approve the Series C round at the time Watson and him advertised it to investors.
Watson also said Monday that a significant portion of Ozy’s earnings was made through “barter agreements,” in which he said the media company received advertisements or other perks in lieu of cash payments from companies including CNBC, NPR and USA Today.
From 2016 to 2018, the company hosted an annual event in Central Park called Ozy Fest, which Watson described Monday as where “Ted Talk meets Coachella.” The annual event featured A-list musicians, comedians and public figures, ranging from Joe Biden to RuPaul and writer Malcolm Gladwell.
One such “barter agreement” Ozy entered into during its festival event, Watson said, was with CNBC in which the broadcast news company agreed to have a booth at the event in exchange for running Ozy ads on its network.
Watson said these “barter agreements” were a way for Ozy to enter into significant partnerships without having the necessary funds to be able to pay premier media and investment companies.
“I realized one of the best things you can do when you’re a young company and you don’t have a ton of money to do barter deals,” Watson said.
“We were committed to barter from the very beginning,” he added.
Watson — who graduated from Harvard University and earned his law degree from Stanford University — said he came up with the idea of Ozy in 2012 with his mother’s help. The company, he said, was conceived as a “sneak peek into the future” and focused on spotlighting “up-and-comers” across multiple industries including politics, entertainment and scientific research.
One way he did this, Watson said Monday, was through Ozy’s “Genius Award” which granted financial grants to help college students fund their passion projects such as a new book, scientific research or launching a non-profit. One of their most famous awardees, Watson said, was poet Amanda Gorman, who later performed at Joe Biden’s 2021 presidential inauguration.
Prior to starting Ozy, Watson worked as a consultant at McKinsey & Company and started his first company Achieva, which was dedicated to helping high school students prepare for college. The company was sold to The Washington Post and Kaplan in 2002.
After he sold Achieva, Watson got involved in media through guest appearances on CNN, MSNBC and Fox News and hosted various news shows including “The Edge with Carlos Watson” on CNBC.
Rao, former chief operating officer, and Han, the onetime chief of staff, each pleaded guilty to charges last year and are now cooperating with the government in the case against Watson. The pair were also named alongside Watson in a separate lawsuit filed by the U.S. Securities and Exchange Commission.
Federal prosecutors rested their case against Ozy Media and Watson last Wednesday following damning testimony from an investor who claimed Watson continuously fed him misinformation about Ozy’s growth and revenue to procure more than $22 million from his investment firm.
Watson will continue his testimony Tuesday. If convicted, he could face up to 37 years in prison.
Follow @NikaSchoonover
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