Carlos Watson, the CEO of the embattled digital media company Ozy, was arrested on fraud charges Thursday, according to court documents obtained by NBC News.
Prosecutors allege Watson misled potential investors about their revenue and business projections to the company’s audience numbers and the identities of its investors, court documents show.
The news was first reported by The Wall Street Journal.
The complaint alleges Watson and other company executives misled investors beginning in 2018, including by falsely claiming the company had doubled its revenue from 2016 to 2017. Instead, the revenue had barely increased from $6 million in 2016 to the following year, the complaint alleges.
Watson and other executives then promised investors Ozy would be able to achieve $22 million in revenue in 2018, "even after it became clear that Ozy could not achieve that result," according to the complaint.
In one instance in August 2018, the complaint notes, Watson learned that the company had booked about $8.1 million in revenue so far that year; later that week, he allegedly told investors the company had booked $14 million in revenue for the year.
In a statement, the U.S. attorney for Eastern New York, Breon Peace, called Watson “a con man whose business strategy was based on outright deceit and fraud.”
If he is convicted, Watson faces a mandatory minimum of two years in prison and a maximum sentence of 37 years, according to the U.S. attorney’s office. He is due to be arraigned Thursday afternoon.
Watson’s co-conspirators, Ozy COO Samir Rao and Chief of Staff Suzee Han, previously pleaded guilty to charges relating to their roles in the scheme, the U.S. attorney’s office said.
Watson could not immediately be reached for comment Thursday. Two phone numbers listed for him had full voicemails, and several other numbers were no longer in service.
In a statement, Watson's lawyer, Lanny Breuer, said he was "deeply disappointed by the events of today."
"We were engaged in a good faith and constructive dialogue with the government," Breuer said. "Given the department’s claims of promoting such dialogue, I do not understand the dramatic decision to arrest Carlos today."
An Ozy spokesperson did not immediately respond to a request for comment.
Watson, a former MSNBC and CNN anchor, co-founded Ozy in 2013 with Samir Rao (MSNBC and NBC News are both owned by NBCUniversal).
Like many other digital-first media companies of the time, Ozy was able to raise tens of millions of dollars, positioning itself as an online magazine focused on "the New and the Next." The company was primarily known for its Ozy Fest events, which often drew politicians and celebrities.
The company had continued to look to raise funds when The New York Times published an article in September 2021 detailing a fundraising call with Goldman Sachs that would lead to Watson’s arrest. On the call, Rao, Ozy’s co-founder, allegedly impersonated a YouTube executive.
The company’s board of directors announced Ozy was shutting down in October 2021 — before Watson claimed the startup was “open for business” just days later.
Former employees told CNBC at the time that Watson was a charismatic and temperamental leader who presided over a demanding work environment in which some reporters were expected to produce four feature-length stories a week. Several of those reporters quit from burnout, according to CNBC.
Read the complaint here: