MANHATTAN (CN) — Ozy Media founder Carlos Watson spearheaded a scheme to scam investors out of tens of millions of dollars and conspired with his co-founder to impersonate leaders of other media groups, prosecutors said during opening arguments Wednesday in Brooklyn federal court.
Prosecutors brought a criminal indictment against Watson and Ozy Media last year under accusations the company lied to investors about finances, business relationships and fundraising. Watson and the defunct media company face charges for conspiracies to commit wire fraud and security fraud, as well as aggravated identity theft.
“This is a case about lies. Lies to get rich, lies to get famous,” Assistant U.S. Attorney Dylan Stern said Wednesday.
Roughly 25 observers, including members of Watson’s family, filled the relatively small courtroom in downtown Brooklyn. Several FBI agents involved in the case sat on the other side of the gallery, and legal interns and public observers filled the remaining seats.
Watson, a Harvard graduate who earned a law degree from Stanford University, says he started Ozy to build a “new” version of media that created innovative multimedia content. From the media company’s inception in 2013 to its closure nearly a decade later, the company created television shows, podcasts and newsletters. Between 2016 and 2018, it also hosted an annual event in Central Park, Ozy Fest, which featured A-list musicians, comedians and public figures. Joe Biden, Ru Paul and Malcolm Gladwell attended in 2017; Hillary Clinton and Common headlined the following year.
Samir Rao, Ozy’s former chief operating officer, and Suzee Han, onetime chief of staff, are cooperating with the government after separately pleading guilty to charges last year. The pair were also named alongside Watson in a separate lawsuit filed by the U.S. Securities and Exchange Commission.
At the center of the government’s case is a conference call from 2021 in which Rao snuck onto a conference call with Goldman Sachs by posing as an executive at YouTube. In the meeting, which was first reported by The New York Times, Rao used a voice alteration service during the call to dupe Goldman employees.
Prosecutors say Watson devised that plan along with Rao in order to manipulate Goldman executives into investing in Ozy Media. When Goldman executives asked to learn more about Ozy’s revenue stream, prosecutors say Watson made up a story that YouTube was interested in buying the rights to Ozy’s “The Carlos Watson Show.”
To further convince them of this supposed deal with YouTube, Watson worked with Rao to impersonate the YouTube executive to secure the Goldman investment. On top altering his voice, Rao created a fake email using the executive’s name. He was being directed by Watson, who was in the room at the time of the call, according to prosecutors.
“Watson personally stood to make millions of dollars from the deal,” Stern said. “All the while impersonating a man who had no idea his identity had been stolen.”
The government also says the executives, led by Watson, misrepresented Ozy’s financial results and funding to investors and forged contracts to try to get a bank loan for a second season of an Ozy television show.
Watson claims he was simply the victim of Rao’s grave betrayal and had no knowledge of any forged contracts or impersonations until it was too late.
“This case is about lies. But it’s not the lies of Ozy Media or Carlos Watson,” Shannon Frison, an attorney for Ozy Media, said Wednesday. “They are the lies of Samir Rao. There is no ‘they’ in the conduct that Mr. Rao took.”
Ronald Sullivan, one of Watson’s attorneys, shared a similar sentiment.
“This is a case about a crooked co-founder named Samir Rao who lied, who undermined and who betrayed Carlos Watson,” Sullivan said. “It really is a simple case.”
According to Sullivan, Rao was entirely in charge of the financial side of Ozy Media operations while Watson mainly handled content management. As such, Sullivan argued that Watson had no knowledge of lies to investors about the state of Ozy Media’s finances and said Rao was in a unique position to add false numbers into the company’s books.
Decked in a navy blue suit and a dark green tie, Watson perked up during Sullivan’s opening statements and nodded along as he spoke.
Sullivan added that Rao had admitted to his culpability in the YouTube executive impersonation incident, pointing to a letter he wrote to his attorney after it happened.
“In that letter, he said it was an absurd, stupid thing to do,” Sullivan said.
Instead, Sullivan said during openings, Watson was shocked when he entered the room and noticed Rao using a voice alteration software.
“He comes into this conversation and it’s a live train wreck going on,” Sullivan said.
Apart from signaling to Rao to get off the call, Sullivan said there was nothing Watson could do.
Rebuffing the government's portrayal of Ozy Media as a company that failed to meet its financial goals and repeatedly covered up its finances to make up the difference, Watson maintains it was a passion project that started with his family.
“Ozy was about family. As a company, it was literally created in Ms. Rose Watson’s kitchen, Carlos Watson’s mother,” Frison said.
She added that, over the years, Watson’s family invested about $20 million in the media company. His family has also been a consistent presence at various court proceedings as trial approached and sat in the front rows during opening arguments.
In the last hour of the day, Rao took the stand and said he conspired with Watson and Han to lie to possible investors from 2018 to 2021.
“Suzee, Carlos and I lied to investors, a number of them, and provided them false information with the intent of getting them to invest money in our company,” Rao said.
He said they lied about Ozy’s revenue, profit earnings, audience data and various other details regarding business operations in order to secure investments.
“We lied about those things because we wanted to give those investors a sense that our company was doing better than it actually was, that it was a more valuable company than it actually was and, therefore, it was more deserving of their investment,” Rao said.
Rao added that he worked directly with Watson to devise lies to tell investors.
“He was the person I committed these crimes with. He was the one who either suggested or in some cases approved the actions that we took and he’s the person I did these crimes with, along with Suzee Han,” Rao said.
Watson was arrested by federal agents last year at the Hotel NH Collection in Manhattan. He has pleaded not guilty to all charges against him. If convicted, he could face up to 37 years in prison.
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