Carlos Watson of Ozzie Media arrested on fraud charges

Jason Weinstein and Ryan Poscablo, attorneys for Ozy Media and Mr Watson, said they were “deeply disappointed” by the government’s actions and had been dealing with them “since December, as recently as yesterday”.

Mr. Rao did not respond to requests for comment. Ed Swanson and Miles Ehrlich, the attorneys representing Mr. Rao, said in a statement that he “accepted full responsibility for his actions,” adding: “He is deeply remorseful, apologizes to those affected, and is committed to making amends for his actions while at Ozy Media.”

Ozy Media started in 2013 and is supported financially by German publishing giant Axel Springer, the Ford Foundation, and the Emerson Collective, the organization founded by Laurene Powell Jobs, among others. She has produced a website, videos posted to YouTube, and a podcast aimed at young audiences. The company has produced a mix of stories and videos that have identified rising leaders and important social causes.

Prosecutors Thursday painted a picture of a company that has struggled for years. In 2015, after raising $35 million from investors over three funding rounds, Ozy’s digital advertising business “didn’t pan out,” according to prosecutors’ complaint. This prompted the company to start a live events business called “Ozy Fest” and create television content.

But live events and television companies were very expensive. By 2017, the company was running out of money. And starting in 2018, he’s taken out high-interest loans to survive, sometimes paying tens of thousands of dollars a day in interest. The complaint said Ozzie soon took on more debt and sought more money from investors.

To secure additional funding, Ozzie misled investors about the company’s financial performance, according to the complaint. In December 2018, the complaint said, Mr. Watson received updates that the company’s final revenue for the year would be less than $11m. But Mr. Watson and Mr. Rao told investors that Ozzie had made twice that amount in revenue that year, the plaintiffs said.

At the end of 2019, to help make ends meet and grow, Ozy sent a fake TV company contract to a bank to help secure a loan over the company’s former CFO protests, according to the complaint. When the former chief financial officer learned of the fraud, she resigned in protest. She was not identified by name in the complaint.