Watson, who was scheduled to be arraigned Thursday, was arrested at a Manhattan hotel. He could face up to 37 years in prison if convicted on the charges, according to a Department of Justice announcement. Watson, Ozy Media and fellow executives have also been charged with fraud — involving approximately $50 million in investment funds — by the Securities and Exchange Commission.
Watson founded Ozy Media in 2012 but the company did not receive widespread public attention until the New York Times published a September 2021 report revealing that Samir Rao, the company’s co-founder and chief operating officer, had allegedly impersonated a tech company executive to help land a large investment. Watson downplayed the incident as a “very personal mental health issue” that had since been resolved, but the company quickly imploded, despite Watson’s claim that it was going to be relaunched. In November 2021, it was announced that both the Justice Department and the Securities and Exchange Commission were investigating Ozy Media.
Rao and Suzee Han, who served as Ozy Media’s chief of staff from 2019 to 2021, have both pleaded guilty to the charges against them.
“As alleged, Carlos Watson is a con man whose business strategy was based on outright deceit and fraud — he ran Ozy as a criminal organization rather than as a reputable media company,” U.S. attorney Breon Peace said in a statement.
The indictment against Watson and his company traces the story of Ozy’s rise and fall, noting that the company’s resources “began to run out in 2017” as it attempted to pivot to expensive television productions and live events.
As the company took on increasing debt, Watson, along with Rao, Han and others, then allegedly “engaged in a scheme” to defraud lenders and investors by misrepresenting, among other things, “Ozy’s historical and projected financial results, Ozy’s debts, Ozy’s audience numbers, the identities of Ozy’s investors and the sizes of their investments, the existence and timing of investment rounds, the identities of Ozy’s business partners, the existence and terms of key contracts and purported offers to purchase Ozy by high-profile corporations,” according to the indictment.
In particular, Watson and others allegedly claimed that Ozy had doubled its revenue to about $12 million in between 2016 and 2017, when it actually totaled less than $7 million. Executives then claimed they would double revenue again, “even after it became clear that Ozy could not achieve that result,” according to the indictment. At another point, Watson allegedly claimed that Ozy had earned $50 million in revenue in 2020 when the company actually brought in only $11 million.
Ozy Media executives are accused of misleading investment funds in South Korea and the Middle East, of taking investments for funding rounds that had not yet been formalized, and of using a forged signature to obtain a loan. At one point, Watson and Rao are accused of creating a fake email address to impersonate a cable television company executive in talks with a potential lender.
Watson, Rao, Han and others are also alleged to have provided falsified financial results to a New York-based digital media company that was considering acquiring Ozy Media in 2019. The sale, which could have netted Ozy some $225 million in value, did not happen.
According to the indictment, Rao used a “voice alteration app” to impersonate a video company executive in a 2021 call with a financial institution. During the call, Watson allegedly sent text messages to Rao telling him what to say.
Lanny A. Breuer, an attorney representing Watson, issued a statement responding to his client’s arrest and indictment. “I am deeply disappointed,” he said in an email to The Washington Post. “We were engaged in a good faith and constructive dialogue with the Government. Given the Department’s claims of promoting such dialogue, I do not understand the dramatic decision to arrest Carlos today.”
The Wall Street Journal first reported Watson’s arrest.
Aaron Schaffer contributed to this report.
