Carlos Watson’s Ozy Media is now under federal investigation

Watson's letter to investors last month noted that Ozy execs had "heard from" both the Justice Department and the SEC.

Ozy Media, headed up by veteran journalist Carlos Watson, is being investigated by the Justice Department and the Securities and Exchange Commission, according to new reporting. 

The New York Times revealed that Watson emailed a letter to investors last month. In it, he noted that Ozy hierarchy had “heard from” the two federal agencies and had retained legal counsel to help “navigate the investigations.” 

Ozy Media, the company Carlos Watson (above) co-founded, is now under federal investigation for conduct investors may have deemed fraudulent. (Photo: Kimberly White/Getty Images)

While the exact focus of the probes was not independently determined by the Times, Ozy Media was sued last month for possibly misleading potential investors. The SEC often investigates investment issues. 

Ozy was founded in September 2013 by Watson and investor Samir Rao, and the company produced podcasts, YouTube content and television shows, as well as social media and in-person events. Rao is no longer with the company. 

The investigations into Ozy began when Goldman Sachs discovered that in February, Rao, then-Ozy’s chief operating officer, made misrepresentations and impersonated a YouTube executive on an investor conference call, an incident Watson attributed to a Rao mental health crisis. Goldman Sachs contacted Google, the parent company of YouTube, and another potential investor, and the tech giant contacted federal authorities. 

LifeLine Legacy Holdings sued Ozy Media last month, claiming it had “engaged in fraudulent, deceptive and illegal conduct.” Lifeline, a Beverly Hills-based fund management firm, agreed to purchase a $2 million stake in Ozy after allegedly being misled to believe that Google and Goldman Sachs were also investing. In their suit, they cite the conference call that began Ozy’s descent.

As previously reported, The Times contended that Ozy was suffering from financial mismanagement and claims that the media entity did not have the audience it was allegedly boasting in order to court investors. 

Ozy Media reportedly shut down on Oct. 1, but Watson appeared on the Today show the following Monday morning to reveal that the company was staying open. 

“We’re going to open for business, so we’re making news today,” The Carlos Watson Show host told Today. “This is our Lazarus moment, if you will; this is our Tylenol moment. Last week was traumatic, it was difficult, heartbreaking in many ways.”

“At the end of the week, we did suspend operations and planned to wind down,” he said, “but as we spent time over the weekend, we talked to advertising partners, we talked to some of our readers, some of our viewers, our listeners, our investors, I think Ozy is part of this moment, and it’s not going to be easy. But I think what we do with newsletters, what we do with original TV shows, podcasts and more, I think we have a place.”

According to The New York Times report, Watson noted in his most recent email that he feels “it is best not to aggravate social media activity by responding to any and all inquiries designed to provoke additional rounds of coverage.”

An opinion piece for theGrio, Sophia A. Nelson declared that the demise of Ozy and the subsequent scandal surrounding co-founder Watson, a Black man, who had toiled building the media platform over the past eight years, is simultaneously tragic and predictable. 

Nelson posits that the controversy surrounding the company is harmful to other Black-owned media platforms. She maintains that Black-owned media companies must be “be ‘twice as good,’ we have to do good business deals, partner with ethical people, and be transparent with our business platforms.” 

This article features additional reporting from theGrio’s Dustin Seibert and Sophia A. Nelson

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