Ozy Media founder denies fraud allegations

Carlos Watson, co-founder of digital media start-up Ozy Media, testified at his fraud trial Monday that he did not conspire to defraud investors.

Instead, he said, his fledgling media company used strategies to build partnerships, secure advertising revenue and attract investors.

“We really thought we had an opportunity to do something special that could last a long time,” Mr Watson told the jury.

Mr. Watson’s testimony is the centerpiece of his defense against charges that he misrepresented his company’s financial performance, fundraising and audience data to investors and lenders from 2018 to 2021. Prosecutors called several witnesses, including potential investors who said Mr. Watson misled them about the company in an effort to secure financing.

Mr Watson, who has pleaded not guilty to all charges against him, could face up to 37 years in prison if found guilty.

Speaking before a jury in federal court in Brooklyn, he denied intentionally misleading anyone.

Mr Watson, who is also a former MSNBC host, stressed his personal involvement in the media start-up, which he said included financial investments and salary cuts to show he was “all in”.

“It’s a challenge when you’re trying to build something different to gain support,” Mr Watson said, adding that the challenge was even greater for a black entrepreneur like himself.

Mr. Watson launched Ozy with Samir Rao in 2013. The startup published news articles and newsletters before venturing into podcast and television production. It attracted commitments from high-profile investors at a time when digital publishers like BuzzFeed and Vice were attracting billions of dollars in investments that largely failed to pan out.

At the heart of the federal criminal case is a 2021 incident when Mr. Rao, Mr. Watson’s deputy, misled Goldman Sachs employees during a fundraising call by posing as a YouTube executive. The disclosure of the conversation, first reported by The New York Times, led to Ozy’s downfall.

Lawyers for Mr. Watson and Ozy have blamed Mr. Rao for the impersonation and for misrepresenting Ozy’s finances to potential investors. Shannon Frison, a lawyer for Ozy, said in her opening statement in May that Mr. Rao was “incompetent for the role he was performing.”

Mr. Watson portrayed himself on Monday as an attentive leader but one who was removed from many of the day-to-day operations of his company. He “couldn’t get into the details” when it came to broader strategic planning, while Mr. Rao and other employees often managed the startup’s finances and technology, Mr. Watson testified.

Mr Rao and Suzee Han, a former chief of staff to Ozy, pleaded guilty to fraud last year.

Several prosecution witnesses also testified that Mr. Watson had falsified his company’s finances to secure investments.

The most prominent witness, Google CEO Sundar Pichai, testified that he had never discussed a possible $600 million acquisition of Ozy. Prosecutors said Mr. Watson told a potential investor that Mr. Pichai had made that offer.

Mr Watson is expected to continue his testimony on Tuesday, including being cross-examined by the prosecution.