Ozy Media, CEO Convicted of Fraud After Staged Goldman Call (2)

Ozy Media and Chief Executive Officer Carlos Watsonwere found guilty of defrauding investors in a case featuring allegations Watson coached his co-founder to impersonate a YouTube executive to get Goldman Sachs bankers to back the media startup.

A jury delivered its verdict on the former TV host and Ozy Media Tuesday in Brooklyn federal court following a six-week trial. Watson was immediately taken into custody after his bail was revoked by the judge.

The company and Watson, 54, were convicted of conspiracy to commit wire fraud and securities fraud, while Watson was also convicted of aggravated identity theft. Watson faces as long as 37 years in prison when he’s sentenced, prosecutors have said, but he is unlikely to get a term that long. The judge set sentencing for Nov. 18.

Prosecutors accused him of obstruction of justice, perjury and other misconduct after he was charged and during the trial. He allegedly helped create a documentary that he advertised in the New York area and elsewhere that the government said could have biased the jury.

His attorneys said in a statement they’re disappointed with the verdict and plan to appeal immediately.

Carlos Watson, center, exits federal court in the Brooklyn borough of New York, on June 7.

Photographer: Yuki Iwamura/Bloomberg

Ozy, a once-lauded media startup based in Mountain View, California, and backed by Marc Lasry, collapsed shortly after the New York Times reported on the impersonation in 2021 and the startup’s business practices came under sharp scrutiny.

Prosecutors alleged that Watson hatched a scheme to con investors out of tens of millions of dollars by lying about Ozy’s revenue and staging the deceptive phone call with two bankers at Goldman Sachs Group Inc.to raise funds. Watson was also accused of falsely telling an investor his startup had received a $600 million takeover offer from a large tech firm.

“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,” US Assistant Attorney Gillian Kassner said during her closing arguments on Wednesday.

Watson’s lawyer, Ronald Sullivan Jr., argued that the government was going after the wrong person.

“This case is about a crooked co-founder Samir Rao who lied, undermined and betrayed Mr. Watson,” he said during his closing statement to the jury.

After the verdict was read Tuesday, Watson’s sister yelled “What?” from the courtroom gallery and said “This is absolutely insane” and “Why are you being racist to my brother?” when US District Judge Eric Komitee revoked Watson’s bail. Marshals said they would not allow Watson to say good-bye to his family because of the reaction by his supporters. A representative of his family declined to comment.

Watson’s lawyer had argued that’s no risk he would try to flee before he’s sentenced. Prosecutors said he has surrendered his passport, but told the judge he’s “not above lying” or taking advantage of his family.

Rao testified at the trial against Watson after agreeing to plead guilty, as did Ozy’s chief of staff, Suzee Han.

Rao told the jury that Goldman Sachs had agreed to invest $35 million in the startup, but asked to hear from clients like YouTube. He testified that to fool the bankers into thinking the company was profitable, he took his cues from Watson on what to say when he pretended to be YouTube executive Alex Piper during a February 2021 conference call. Both immediately realized their plan failed catastrophically, Rao said.

In their own testimony, the Goldman bankers said the deal collapsed after they heard a “surreal” voice on the call. Rao said he had used a voice-altering app to disguise his voice. Goldman reached out to the real Alex Piper, who phoned Rao and demanded an explanation.

Read More: Ozy Media CEO Watson Blames Co-Founder for Fake Goldman Call

Watson took the witness stand for several days to defend himself. He denied wrongdoing and any involvement in the staged Goldman phone call.

During cross-examination Watson was asked by a prosecutor why he didn’t fire Rao after the Goldman call. He replied that Rao was put on suspension and said under questioning from his own attorney that he didn’t have the power to terminate his co-founder.

Ozy’s board of directors removed Rao from the board after the Goldman call.

The case is US v. Watson and Ozy Media Inc., 23-cr-82 US District Court, Eastern District of New York (Brooklyn).

(Updates with judge revoking bail for Watson.)

To contact the reporters on this story:
Avalon Pernell in New York at apernell@bloomberg.net;
Patricia Hurtado in Federal Court in Manhattan at pathurtado@bloomberg.net

To contact the editors responsible for this story:
Misyrlena Egkolfopoulou at megkolfopoul@bloomberg.net

Peter Blumberg, Peter Jeffrey

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