NEW YORK — The founding father of the troubled digital start-up Ozy Media was arrested Thursday on federal fraud prices as a part of what prosecutors say was a scheme to prop up the financially struggling firm, which hemorrhaged hundreds of thousands of {dollars} earlier than it shut down amid revelations of presumably misleading enterprise practices.
Federal brokers arrested Carlos Watson at a Manhattan resort after two of the corporate’s high executives pleaded responsible this month to fraud prices, together with Ozy’s then-chief working officer, Samir Rao, who allegedly impersonated a YouTube government throughout a pitch to Goldman Sachs, a possible investor.
The indictment unsealed Thursday in U.S. District Court in Brooklyn accuses Watson of conspiring to commit securities fraud and wire fraud, in addition to identification theft for his function within the impersonation of a number of media executives.
Ozy marketed itself as a progressive digital platform for “the New and the Next,” saying on its web site that it sought to create a “space for fresh perspectives, introduces you to rising stars and breakthrough trends, and offers new takes on everything from news and culture to technology, business, learning and entertainment.” But it imploded below insurmountable debt, forcing it to depend on high-interest loans and to extra aggressively court docket buyers.
In a parallel civil case, the Securities and Exchange Commission additionally charged Watson and the corporate with defrauding buyers of about $50 million “through repeated misrepresentations concerning the company’s basic financial condition, business relationships, and fundraising efforts.”
The SEC mentioned Rao and Ozy’s former chief of employees, Suzee Han, have “agreed to resolve the charges against them,” as they did individually with U.S. prosecutors.
Rao pleaded responsible in federal court docket this week, whereas Han did so final week. The responsible pleas and arrest have been first reported by the Wall Street Journal.
“I am deeply disappointed by the events of today,” Watson’s legal professional, Lanny Breuer, mentioned after the arrest. “We were engaged, I thought, in a good faith and constructive dialogue with the government. And given the government’s claims of promoting such dialogue in general, I simply do not understand the dramatic decision to arrest Carlos this morning.”
Scrutiny over the corporate deepened after the New York Times reported in October 2021 that an Ozy official had masqueraded as a YouTube government in a failing try to get Goldman Sachs to infuse cash into the struggling enterprise.
Shortly after, Ozy mentioned it was shutting down.
“As alleged, Carlos Watson is a con man whose business strategy was based on outright deceit and fraud,” mentioned 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 subject workplace mentioned Watson “repeatedly attempted to entice both investors and lenders through a series of deliberate deceptions and fabrications.”
Authorities say Watson and his enterprise companions, between 2018 and 2021, tried to defraud buyers and lenders of “tens of millions of dollars through fraudulent misrepresentations and omissions” concerning the firm’s money owed and different key monetary data.
On a number of events, the U.S. legal professional’s workplace mentioned, Watson and his colleagues pretended to be different media executives to cowl up earlier misrepresentations.
If convicted, Watson faces not less than two years in jail, with a most of 37 years, the U.S. legal professional’s workplace mentioned.
The SEC’s civil grievance, additionally filed within the U.S. District Court in Brooklyn, accuses Watson and the corporate of violating anti-fraud provisions of federal securities legal guidelines.
“We allege that over the course of several years, the defendants raised approximately $50 million from victim investors on the basis of fraudulent documents and repeated misrepresentations, including, at least in one case, falsely impersonating a potential business partner during a meeting with an investment bank,” mentioned Gurbir S. Grewal, the SEC’s director of enforcement.
The company, whose regulatory duties embody defending buyers, accused Ozy officers of “routinely and purposely” presenting potential buyers with doubtful monetary data, together with falsely claiming that the corporate’s revenues have been not less than twice what they really have been.
In addition, the SEC mentioned, Watson and Rao additionally sought investments by allegedly telling potential buyers that they have been securing cash from high-profile corporations and buyers.
In one case, the SEC and federal prosecutors contend, Watson and Rao launched a ruse that had Rao impersonating a YouTube government to persuade a potential investor that it was getting licensing income from the net video-sharing behemoth.
When the potential investor found the alleged ploy, Watson asserted that Rao was affected by a “mental health crisis,” the SEC mentioned.
Source: www.bostonherald.com”