*On Thursday (05-30-24) at the trial of Carlos Watson, the founder and CEO of Ozy Media, a former executive (Samir Rao) of the now-defunct company provided revealing testimony. Standing before the Brooklyn federal court, Rao confessed to fabricating the company’s earnings and creating fake invoices during sale negotiations with BuzzFeed. This desperate attempt was aimed at keeping the struggling media company afloat.
Watson himself took the stand on the second day of his jury trial. The embattled executive and entrepreneur, known for his polished public persona and impressive academic background—holding degrees from Harvard and Stanford Law School—appeared in court donning a black suit. He faces severe criminal charges, including securities and wire fraud conspiracies and aggravated identity theft. Watson is accused of deceiving investors with false claims about Ozy’s revenue, profit earnings, and audience data to secure crucial funding.
Rao, who once served as the Chief Operating Officer, and Suzee Han, a former chief of staff, both pleaded guilty to related charges last year. Now cooperating with the government, both Rao and Han are also implicated alongside Watson in a separate lawsuit filed by the U.S. Securities and Exchange Commission (SEC), according to an update from Courthouse News Service.
Rao, detailing his involvement with Ozy Media, described a series of deceptive schemes designed to portray the company as a thriving entity despite its financial struggles. Testifying in a white button-up shirt and a dark gray jacket, Rao recounted his initial encounter with Watson at a Chipotle in Mountain View, California. Watson, a former MSNBC contributor, introduced Ozy as a fresh, innovative news platform focusing on untold stories about unique people, places, trends, and ideas.
Convinced by Watson’s vision, Rao joined Ozy Media and became his “right-hand man” for nearly a decade until the company ceased operations in 2021.
Financial Struggles and Deceptive Practices
Ozy Media’s financial troubles began surfacing around 2017. Rao admitted that he, Watson, and Han began misleading investors to keep the company solvent. He detailed one notable scheme involving the inflation of financial projections to attract investors.
In 2019, negotiations with BuzzFeed brought Ozy into a potential sale scenario. Rao testified that he and Watson exaggerated the company’s earnings in their pitch decks to entice BuzzFeed. At its peak, Ozy Media was known for original TV shows like “The Carlos Watson Show,” which featured interviews with high-profile personalities such as Joe Biden, Hillary Clinton, and John Legend. The company also earned recognition for its annual “Ozy Fest,” which showcased performances from A-list musicians, comedians, and public figures including RuPaul, Malcolm Gladwell, and Common.
Rao revealed that during negotiations with BuzzFeed, they emphasized Ozy’s television and event ventures, significantly inflating revenue figures to depict a more successful operation. For instance, the television revenue for 2019 was exaggerated from $6 million in the initial draft to $8 in the final presentations. Similarly, events revenue for 2020 was falsely increased from $11 million to $15 million.
Fabrication and Fallout
Beyond the pitch decks, Rao confessed to fabricating invoices to secure bank loans. In one instance, he created a false invoice to obtain a loan from FastPay (now AvidXchange), which backfired and led to Ozy losing FastPay as a client when the forgery was uncovered. This loss further exacerbated Ozy Media’s financial instability.
Rao shared the grueling efforts taken to ensure employee payroll despite the financial turmoil. He resorted to securing high-interest “merchant cash advances” to avoid alarming employees with delayed paychecks.
He highlighted a scenario where a $200,000 loan required daily repayments of $50,000 or more to keep up with payroll demands.
“The burden to pay back this debt every single day was crushing,” Rao testified.
The Road to Arrest and Ongoing Legal Battles
Despite their efforts, the sale to BuzzFeed never came to fruition. Watson asserted that he rejected escalating offers from BuzzFeed. Subsequently, Ozy Media sued BuzzFeed and its former Editor-in-Chief, Ben Smith, accusing them of stealing trade secrets during the negotiation process to initiate Semafor, a global news organization launched in 2022.
Ben Smith played a crucial role in Ozy’s exposure. His 2021 New York Times article revealed that Rao had impersonated a YouTube executive on a Goldman Sachs conference call, a revelation that contributed significantly to the company’s downfall.
Carlos Watson’s arrest last year in Manhattan marked the start of a legal saga that could end with Watson facing up to 37 years in prison if convicted. The trial continues to unravel the intricate web of deception spun by Ozy Media’s top executives in their desperate attempt to keep the company from collapsing.
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