Federal prosecutors brought a criminal indictment Thursday against the fallen digital media company Ozy Media, saying its executives impersonated leaders of other media groups and lied about the company’s finances to scam investors out of tens of millions of dollars, reports Courthouse News Service. Prosecutors announced securities and wire fraud conspiracy charges against Ozy and its former Chief Executive Officer Carlos Watson within hours of the U.S. Securities and Exchange Commission filing a lawsuit that says the company lied to investors about business relationships, finances and fundraising. FBI agents arrested Watson Thursday. Facing charges of aggravated identity theft, Watson was released on a $1 million bail package secured by his home in Mountain View, Ca., and the signature of his two sisters. Watson may not contact Ozy employees or investors as part of his release agreement, a condition U.S. Magistrate Judge Cheryl Pollak imposed over protests by Watson's employees.
Samir Rao, Ozy’s former chief operating officer, and Suzee Han, onetime chief of staff, are cooperating with the government after having pleaded guilty to charges earlier this month, but both are named along with Watson in the SEC complaint. Rao snuck into a conference call with Goldman Sachs, posing as a YouTube executive. In the meeting, Rao claimed that Ozy was doing gangbusters on its video-streaming website, pulling in lots of ad money and was served well by Watson’s leadership. After a YouTube investigation implicated Rao, who used voice alteration during the call, Watson apologized to Goldman. He characterized the incident with Rao as stemming from a mental health crisis. Ozy shut down less than a week later. Executives tried to get a bank loan based on projected revenue from the second season of an Ozy television show before the program’s return had been confirmed, with the help of a phony contract between Ozy and an unnamed cable network. It prompted the chief financial officer to resign. “[This] is illegal. This is fraud. This is forging someone’s signature with the intent of getting an advance from a publicly traded bank,” the executive told Watson and Rao. “To be crystal clear, what you see as a measured risk — I see as a felony.” Watson is accused of trying to arrange a $6 million payout for himself as part of a $45 million investment that fell through.