The founder of the troubled digital start-up Ozy Media was arrested Thursday on fraud charges as part of a scheme to prop up the financially struggling company, which hemorrhaged millions of dollars before it shut down amid revelations of possibly deceptive business practices.
The arrest of Carlos Watson at a Manhattan hotel came after two of the company's top executives pleaded guilty this month to fraud charges, including Ozy's then-chief operating officer, Samir Rao, who allegedly impersonated a YouTube executive during a pitch to Goldman Sachs, a potential investor.
The guilty pleas were first reported by the Wall Street Journal.
The indictment accuses Watson of conspiring to commit securities fraud and wire fraud, as well as identity theft for his role in the impersonation of several media executives.
“We are really disappointed,” Watson's attorney, Lanny Breuer, told the Journal after the 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.”
Scrutiny over the company deepened after the New York Times reported in October 2021 that an Ozy official had masqueraded as a YouTube executive in a failing attempt to get Goldman Sachs to infuse money into the struggling enterprise.
Shortly after, Ozy said it was shutting down.
“As alleged, Carlos Watson is a con man whose business strategy was based on outright deceit and fraud," said Breon Peace, the U.S. 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.”
Authorities say Watson and his business partners, between 2018 and 2021, 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.
On multiple occasions, the U.S. attorney's office said, Watson and his colleagues pretended to be other media executives to cover up earlier misrepresentations.
