Carlos Watson, Ozy Media Founder, Is Found Guilty of Fraud

Carlos Watson, Ozy Media Founder, Is Found Guilty of Fraud - The New York Times

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Carlos Watson, Ozy Media Founder, Is Found Guilty of Fraud

Mr. Watson, who denied lying to investors and lenders, faces up to 37 years in prison.

A federal jury on Tuesday found Carlos Watson and Ozy Media, the digital media company he co-founded, guilty of trying to defraud investors and lenders to promote the start-up venture.

The jury deliberated for three days after an eight-week trial in which the prosecutors accused Mr. Watson of conspiracy to commit securities and wire fraud. Many of the government’s witnesses revealed new details about deception at the company, including an impersonated phone call, fabricated contracts and misleading claims about Ozy’s earnings.

“Watson knew the company was failing, but he was determined to turn Ozy and himself into the next big thing, and he wasn’t going to let the truth stand in his way,” Gillian Kassner, a prosecutor, said during closing arguments in U.S. District Court in the Eastern District of New York.

Mr. Watson now faces up to 37 years in prison.

During the trial, Mr. Watson’s lawyers blamed other Ozy employees for any allegedly fraudulent activity, arguing that Mr. Watson’s representations to investors were based on good-faith assessments of Ozy’s finances. Mr. Watson made similar arguments from the stand, claiming that he did not intentionally inflate revenue estimates, but rather presented the types of service-based income typical for a “scrappy young company” in its early years.

Lawyers for Mr. Watson and Ozy said they were disappointed in the jury’s verdict and planned to appeal “immediately.”

Samir Rao, the other co-founder of Ozy, and Suzee Han, a former Ozy chief of staff, pleaded guilty last year to fraud charges. Both cooperated with the government in its case against Mr. Watson, testifying against him.

Mr. Watson started Ozy in 2013, publishing news articles and newsletters before venturing into podcast and television productions. The start-up secured commitments from prominent investors at a time when digital publishers, like BuzzFeed and Vice, attracted billions of dollars in investments that largely didn’t pan out.

On several occasions, defense lawyers tried to shift the blame for Ozy’s alleged lies to Mr. Rao in an effort to create distance between Mr. Watson and the details of Ozy’s daily operations. That strategy was particularly evident in testimony about an incident at the heart of the case: a 2021 fund-raising call during which Mr. Rao misled Goldman Sachs employees by impersonating a YouTube executive. The call was first reported by The New York Times.

Prosecutors alleged that Mr. Watson had helped facilitate the call. They cited text messages he sent to Mr. Rao during the call — among them, “use the right pronouns” — that, they claimed, amounted to instructions for what to say.

But, when questioned by one of his lawyers about his involvement, Mr. Watson denied any responsibility. He said he had walked into Mr. Rao’s office when the call was already underway and began to connect the dots.

“I assumed at the time that I was watching someone melting down,” Mr. Watson testified.

Several of the prosecution’s witnesses also testified that Mr. Watson had misrepresented his company’s finances to secure investments, inflating revenue figures and presenting misleading claims of commitments from the likes of Oprah Winfrey and Live Nation Entertainment.

Prosecutors presented the jury with evidence showing that Mr. Watson had sent emails to investors claiming Ozy made $12 million in 2017 — while Ozy’s tax return for that year listed less than $7 million in gross sales. When pressed about the emails during the prosecution’s cross-examination, Mr. Watson again pointed a finger at Mr. Rao.

“Samir drafted these,” Mr. Watson testified. “I would never draft something with that level of specificity.”

Leading up to the trial, a lawyer for Mr. Watson argued that the government’s allegations involved the same “puffing and bluffing” practiced by the founders of BuzzFeed and Vice but that prosecutors had singled out Mr. Watson for punishment because he is a Black man. In April, a judge rejected Mr. Watson’s motion to dismiss the charges on the grounds of discriminatory prosecution.

Among the witnesses called to the stand in Mr. Watson’s trial was Google’s chief executive, Sundar Pichai, who testified that he had never discussed a possible $600 million takeover of Ozy. Prosecutors said Mr. Watson had told a prospective investor that Mr. Pichai made that offer.

Danielle Kaye is a business reporter and a 2024 David Carr Fellow, a program for journalists early in their careers. More about Danielle Kaye

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