Fraud Trial to Begin for Ozy Founder Carlos Watson

Fraud Trial to Begin for Ozy Founder Carlos Watson

The 2010s have been a frothy time for digital publishing. Billions of {dollars} flowed into publishers like BuzzFeed and Vice, with massive media firms and enterprise capitalists betting these start-ups would finally make a number of cash.

For essentially the most half, these enormous income have been a pipe dream. But regardless of the misplaced cash, upset buyers and a slew of unfavourable press protection, the executives who based these firms by no means needed to reply for his or her conduct in a courtroom. Until now.

The jury trial of Carlos Watson, who’s charged with attempting to defraud buyers within the digital media start-up he co-founded, Ozy Media, is scheduled to start Monday with jury choice in federal court docket in Brooklyn. Mr. Watson has pleaded not responsible to all the fees in opposition to him. If convicted, he might resist 37 years in jail.

It stays unclear what Mr. Watson’s protection might be when the trial begins, or whether or not he’ll take the stand. But one of many arguments his lawyer has made in court docket filings main as much as the trial is uncommon: The allegations contain the identical “puffing and bluffing” practiced by the founders of BuzzFeed and Vice, however prosecutors singled out Mr. Watson for punishment as a result of he’s a Black man.

“Their founders reportedly — and in some instances, admittedly — engaged in conduct that differs from the conduct charged in Mr. Watson’s indictment in just one approach,” his legal professionals argued in a authorized submitting from August. “Their conduct was, by orders of magnitude, much more egregious. And but they haven’t been indicted.”

A judge in April rejected Mr. Watson’s movement that the fees be dismissed due to discriminatory prosecution.

“Carlos Watson is harmless of all fees, and we stay up for a jury making that willpower in court docket,” stated his protection counsel, Ronald Sullivan Jr.

Prosecutors declined to remark. The trial is anticipated to stretch into the summer time.

Mr. Watson, a former MSNBC anchor, started publishing Ozy in 2013 with backing from distinguished buyers just like the hedge fund manager Marc Lasry and Emerson Collective, the group run by the billionaire philanthropist Laurene Powell Jobs. Ozy revealed newsletters and on-line information articles, usually specializing in developments and personalities it deemed “the brand new and the subsequent.” The firm additionally produced podcasts and tv reveals.

But in 2021, Ben Smith, then a media columnist for The New York Times, revealed that Mr. Watson’s deputy, Samir Rao, had misled Goldman Sachs workers throughout a name that February as the corporate was elevating cash. Under scrutiny, Ozy started to falter, and employees members fled.

The firm shut down however a model of its web site has continued to limp alongside underneath the shadow of the fraud allegations going through Mr. Watson.

Mr. Watson was arrested in February 2023 and charged with fraud and aggravated id theft. In the indictment, filed in U.S. District Court within the Eastern District of New York, prosecutors detailed how Ozy began to tackle debt in 2018 as its funding was operating out and its digital media enterprise failed to usher in sufficient income.

Federal prosecutors say that from 2018 to 2021, Mr. Watson, together with Mr. Rao and different executives, tried to usher in more cash by misrepresenting Ozy’s monetary outcomes, funding and viewers knowledge to buyers and lenders. Mr. Watson knowingly inflated income numbers to buyers and potential buyers quite a few occasions, the indictment stated, and gave deceptive details about contributors in a financing spherical.

“Virtually all the cash raised within the Series C” spherical, about $13 million, was raised by way of misrepresentations by Ozy, the grievance stated.

Prosecutors have argued that Mr. Watson solid a contract for a second season of an Ozy TV present to attempt to get a financial institution mortgage, prompting Ozy’s chief monetary officer to resign and write to Mr. Watson in an electronic mail: “This … is against the law. This is fraud.”

The indictment stated Mr. Watson had instructed Mr. Rao to impersonate an government within the February 2021 video name to attempt to safe a $45 million funding. After the decision, the potential investor contacted the individual whom Mr. Rao had impersonated and unraveled the ruse, prosecutors say. Mr. Watson claimed on the time that Mr. Rao had suffered a psychological breakdown and had acted alone.

Mr. Rao and Suzee Han, a former Ozy chief of employees, pleaded responsible final 12 months to fraud fees.

Foster Kamer, a digital-media veteran who has been concerned in a number of start-ups, stated the actions that Mr. Watson was accused of committing have been far totally different from the overly optimistic projections that many executives and buyers made within the digital media go-go years of the 2010s.

The different media leaders and buyers had “a monetary euphoria on par with Beanie Babies, tulips and meme shares,” stated Mr. Kamer, who’s the editor in chief of Futurism, a information web site. “But you’ll be able to’t impersonate executives on convention calls. It’s fairly minimize and dry.”

Shannon Frison, protection counsel for Ozy, drew a distinction between it and opponents like BuzzFeed and Vice, saying Ozy was far more various and generated a lot of its income from its TV present and occasions and digital publication companies.

“They actually did have a distinct enterprise mannequin altogether,” Ms. Frison stated.

In December, Mr. Watson sued Mr. Smith and Mr. Smith’s present firm, Semafor, in addition to BuzzFeed, his employer earlier than The Times. In his lawsuit, Mr. Watson says Mr. Smith was made aware about details about Ozy in his function as the highest editor of BuzzFeed News after the 2 firms mentioned a deal in 2019. Mr. Watson stated Mr. Smith had used that info to start out Semafor, a media start-up.

Lawyers for Mr. Smith and Semafor have stated the claims don’t have any advantage. Spokeswomen for each BuzzFeed and Semafor declined to remark.


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