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The Ozy Media boss has been arrested in New York City after his co-founder pleaded guilty to impersonating a YouTube executive on a fundraising call.
CEO Carlos Watson, 53, of Mountain View, California, was arrested by the FBI on Thursday morning at the NH Collection Hotel on 38th Street in Manhattan, a law enforcement source told DailyMail.com.
The Justice Department said the executive was conspiring to “defraud Ozy’s investors and lenders by making material misrepresentations about Ozy’s financial and business assets.”
He is expected to be arraigned later today in Brooklyn on charges of conspiracy to commit securities fraud and conspiracy to commit wire fraud.
If convicted, Watson faces a “mandatory minimum sentence of two years in prison and a maximum sentence of 37 years in prison.”
CEO Carlos Watson, 53, of Mountain View, California, was arrested by the FBI Thursday morning on charges of conspiracy to commit securities fraud and wire fraud. If convicted, Watson faces a “mandatory minimum sentence of two years in prison and a maximum sentence of 37 years in prison.”
He was arrested at the NH Collection Hotel on 38th Street in Manhattan, a police source told DailyMail.com.
“As alleged, Carlos Watson is a con artist whose business strategy was based on deception and fraud: he ran Ozy as a criminal organization rather than a trusted media company,” US Attorney Breon Peace said in a statement. .
‘As today’s indictment alleges, Watson repeatedly attempted to woo both investors and lenders through a series of deliberate deceptions and fabrications.
“Investment fraud undermines confidence in our nation’s markets and investors and makes it harder for honest companies to compete.”
Its co-founder, Samir Rao, pleaded guilty to fraud Tuesday in Brooklyn on fraud and identity theft charges after he admitted to using a pseudonym between February 2020 and February 2021. Additionally, between 2018 and 2021, Rao made claims misleading investors to inflate the company’s financial status.
The New York Times revealed Rao posing as Alex Piper, YouTube’s head of unscripted programming, to answer for Ozy on a call with Goldman Sachs in February 2021.
Ozy set up a Zoom meeting with Goldman Sachs officials and informed them that Piper would be there to provide insights into Ozy’s success on YouTube. However, on the day of the meeting, an email that appeared to come from Piper explained that she was running late and requested that the meeting be moved to a conference call, according to four sources briefed on the meeting, the Times reported.
Once on the call, Rao, like Piper, bragged that Ozy had a huge subscriber base, garnered significant ad dollars, and was led by an incredible leader, CEO Carlos Watson.
Its co-founder, Samir Rao, pleaded guilty to fraud Tuesday in Brooklyn to fraud and identity theft charges after admitting to using a pseudonym between February 2020 and February 2021.
Watson, who claimed Rao had a mental breakdown when he tried to defraud Goldman Sachs, was found to have been on the call with him and texted him suggestions on what to say.
But the voice did not sound natural to Goldman Sachs officials on the call, who described it as almost “digitally altered,” the Times reported.
After the call, a Goldman Sachs official emailed a confused Piper, using a different email than the one she received before the meeting, and the YouTube executive explained that he was never on the call.
YouTube launched its own investigation after discovering that someone had impersonated one of its executives, which quickly led them to Rao.
Watson had also been present during the call, according to the Justice Department, and was texting Rao’s suggestions on what to say, according to the arrest memo obtained by DailyMail.com.
Watson reached out to Goldman Sachs and also confirmed that Rao was the one on the call, apologizing profusely for his actions. Watson attributed Rao’s actions to a “mental health crisis” but did not elaborate, the Times reported.
He added that Rao took a break from work after the incident, but returned after a short time.
His former chief of staff, Suzee Han, has also pleaded guilty to charges related to the scheme. Han worked for the company from June 2019 to October 2021.
The trio “orchestrated a scheme to defraud Ozy’s investors and lenders of tens of millions of dollars through fraudulent misrepresentations and omissions about key aspects of Ozy’s business, including financial results, debts and the size of the audience of Ozy,” the Justice Department said.
The DOJ said Watson and his co-conspirators “lied” to investors about who was investing in the media company and told their employees to “create bogus contracts with forged signatures to provide due diligence.”
Ozy attempted to swindle millions of dollars from various investors and used a fake email address to do so, further inflating Ozy’s success.
The DOJ has asked the judge not to release Watson after he is arraigned today because he has “the means to flee if he chooses.”
In addition to trying to defraud a bank, the company tried to trick a bank into lending them money for the second season of an Ozy TV show in December 2019.
To force the bank to close the deal faster, Watson ordered the then CFO to send a fake contract with a forged signature between the company and the cable network.
The CFO resigned the same day, telling the co-founders: ‘This…is illegal. This is fraud. This is forging someone’s signature with the intent to obtain an advance from a publicly traded bank. To be crystal clear, what you see as a measured risk, I see as a felony.
Despite his resignation, the co-founders continued to press the bank for months to lend them “several millions.” Throughout the negotiations, the bank asked to speak with a member of the cable network company. Rao, with Watson’s approval, created a fake email account in the name of a real executive and used it to communicate with the bank.
The couple also claimed that a media company offered to buy them for $300 million, despite the fact that the deal fell through.
On December 7, 2019, Watson texted Rao, writing: ‘FYI, I told you [the Middle East Liaison] it’s [Media Company I] offered $300 million to buy us out.’
The couple had repeatedly given the Middle East Link “inflated projections for 2020”. They told the link that the company had made $35 million in 2019, but had made, at most, $13 million. They also said that he was projected to earn $65 million in 2020.
From November 2020 to February 2021, Ozy attempted to get Goldman Sachs to invest up to $45 million by misrepresenting the company’s historical and projected financial results.
“Had the total investment of $45 million been made as planned, $6 million of the $45 million would have been paid personally to Watson,” the Justice Department said.
The Justice Department alleged that Watson regularly received emails with updates on Ozy’s financial situation, which they withheld when subpoenaed, along with the CFO’s resignation letter.
Furthermore, Watson had deleted incriminating text messages.
The Justice Department requests that Watson not be released as he has “the means to flee if he chooses to do so.”