Ozy Media Sued Over Co-Founder’s Goldman Call Impersonation
(Bloomberg) -- Ozy Media Inc. was sued by an investor over its co-founder’s impersonation of a YouTube executive during a conference call with Goldman Sachs Group Inc. executives about a potential investment.
LifeLine Legacy Holdings LLC said in a securities fraud suit filed late Monday that it invested around $2.25 million in Ozy in February and May partly because co-founders Carlos Watson and Samir Rao claimed Goldman was about to put money in the company.
“Watson and Rao expressly represented to LifeLine that Goldman Sachs was positioning itself to make a substantial investment in the company,” Beverly Hills-based LifeLine said in its complaint filed in federal court in San Jose.
The board of Ozy, which billed itself as a “modern media company,” said the company was shutting down on Friday, just days after the New York Times reported that Rao impersonated a YouTube executive to tout Ozy’s success on the video-sharing site. According to the Times, Goldman passed on investing, and Google, YouTube’s parent, referred the matter to the Federal Bureau of Investigation.
Watson, Ozy’s chief executive officer, didn’t immediately respond to a request for comment. Nor did the law firm Paul, Weiss, Rifkind, Wharton & Garrison, which Ozy’s board said last week it had hired to conduct an internal investigation.
Ozy never disclosed that “Rao attempted to impersonate an executive of YouTube in an effort to obtain a substantial investment from Goldman Sachs, or that, as a result of Rao’s fraudulent conduct, Goldman Sachs declined to invest in Ozy Media and that Ozy Media was under investigation by government agencies,” LifeLine said in its suit.
The Times report also raised significant questions about Ozy’s viewership and newsletter subscription claims. Another Times story suggested Ozy had misled both employees and interview guests of the “Carlos Watson Show” into thinking the talk show was going to be shown on a major cable channel.
LifeLine said Watson and Rao approached it about an investment in late 2020, boasting of Ozy Media’s strong financial performance, seemingly impressive viewership metrics and significant institutional investor interest. The fund said it bought about $2 million worth of Series C preferred shares in February and $250,000 worth of Series D preferred shares in May.
Though Ozy’s board said the company was shutting down, Watson claimed in several interviews this week that Ozy would soon be back. He acknowledged to Axios that it might be difficult for Ozy to find partners given perceptions that he and the company had been misleading.
“We’ll be creative, we have to be,” Watson said.
The case is Lifeline Legacy Holdings LLC v Ozy Media, 21-cv-7751, U.S. District Court, Northern District of California (San Jose.)
©2021 Bloomberg L.P.