Jason Weinstein and Ryan Poscablo, lawyers for Ozy Media and Mr. Watson, said that they were “extremely disappointed” by the government’s actions and had been engaging with them “since December, and as recently as yesterday.”
Mr. Rao did not respond to requests for comment. Ed Swanson and Miles Ehrlich, lawyers who represent Mr. Rao, said in a statement that he had “accepted full responsibility for his actions,” adding, “He is deeply remorseful, apologetic to those affected, and committed to making amends for his actions while at Ozy Media.”
Ozy Media was started in 2013 and backed financially by the German publishing giant Axel Springer, the Ford Foundation and the Emerson Collective, the organization founded by Laurene Powell Jobs, among others. It produced a website, videos posted to YouTube and podcasts that were aimed at young audiences. The company generated a mix of stories and videos that identified up-and-coming leaders and important social causes.
Prosecutors on Thursday painted a picture of a company that had struggled for years. In 2015, after raising $35 million from investors over three funding rounds, Ozy’s digital advertising business “was not succeeding,” according to the prosecutors’ complaint. That spurred the company to start a live-events business called “Ozy Fest” and create television content.
But the live events and television businesses were expensive. By 2017, the company’s cash was beginning to run out. Beginning in 2018, it took on high-interest loans to survive, at times paying tens of thousands of dollars a day in interest. Ozy soon took on more debt and pursued more money from investors, the complaint said.
To secure additional funding, Ozy misled investors about the company’s financial performance, according to the complaint. In December 2018, Mr. Watson received updates that the company’s final revenue for the year would be less than $11 million, the complaint said. But Mr. Watson and Mr. Rao told investors that Ozy had generated roughly double that amount in revenue that year, prosecutors said.
At the end of 2019, to help cover expenses and grow, Ozy sent a fake contract with a TV company to a bank to help secure a loan over the protests of the company’s former chief financial officer, according to the complaint. When the former chief financial officer became aware of the fraud, she quit in protest. She was not identified by name in the complaint.
