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- Ozy Media CEO Carlos Watson was arrested on Thursday.
- Watson is facing conspiracy charges in New York federal court.
- A New York Times report in 2021 said Ozy's other cofounder masqueraded as a YouTube executive on a call.
Carlos Watson, the head of embattled media company Ozy, was arrested on Thursday after scandal-plagued years that saw the brand's other cofounder Samir Rao exposed for pretending to be a YouTube executive, and tumultuous back-and-forths on whether it would close down.
Watson was arrested and is facing criminal charges in New York federal court, The Wall Street Journal first reported. An attorney for Watson did not immediately return Insider's emailed request for comment on Thursday morning.
"We are really disappointed," a lawyer for Watson, Lanny Breuer, told the Journal. "We have been acting in good faith and believe we had a constructive dialogue with the government and are shocked by the actions this morning."
Rao, who was also Ozy's chief operating officer, has himself privately pleaded guilty to charges including fraud, which relate to allegations that he exaggerated the company's finances to investors, according to the WSJ.
The fateful call involving Rao reportedly took place in February 2021, according to The New York Times' investigation, and involved discussions with Goldman Sachs for a $40 million deal. After the scandal broke later that year, current and former Ozy employees told Insider that their work culture was grueling and that there were doubts about the actual size of the company's audience.
Watson announced the company shut down in 2021, but has since said it was opening for business, with new hires. Earlier in February, he appeared on stage at ad agency IPG's Equity Upfront, and pitched advertisers on a return of its flagship event, Ozy Fest, in Miami in the summer.
Prosecutors allege 'serious and years-long deceptions'
Watson is expected to appear before a federal court in Brooklyn on Thursday, for an initial hearing where issues like bail can be discussed.
Meanwhile, prosecutors argued in a filing that the court should consider Watson's "serious and years-long deceptions" in determining any conditions of his release while the case unfolds.
Criminal defendants can be released on bail, under certain conditions, while they await trial.
In their filing, prosecutors painted Watson as a serial liar, alleging that he lied about Ozy's finances, about its investors, and potential deals, all to portray it as a successful enterprise and to obscure its money troubles. They alleged, for instance, that he had falsely stated that a tech company had offered $600 million for an acquisition deal, which prosecutors said wasn't true.
They also alleged that Watson sought to interfere with the government's investigation into the scandals at Ozy, saying that he and the company tried to "retaliate against witnesses perceived to be cooperating with the government's investigation, including by cutting off funding for their legal defense."
"Watson's commission of a years-long fraudulent scheme suggests that he does not have a truthful or reliable character," prosecutors said in their filing on Thursday. "In addition, his sole employment for the last decade has been at a company he operated by means of the charged fraudulent scheme, and which has been charged alongside him."