A media and entertainment company and some of its senior executives have been charged with fraud, the Securities and Exchange Commission announced.
The SEC filed a complaint in federal court for the Eastern District of New York against Ozy Media Inc., its CEO Carlos R. Watson, Jr., its former COO Samir Rao, and its former Chief of Staff Suzee Han. The defendants are accused of defrauding investors of about $50 million by repeatedly misrepresenting the company’s financial condition, business relationships, and fundraising efforts.
The allegations cover the period from at least January 2019 through September 2021. According to the SEC, the defendants gave investors false information that inflated Ozy Media’s annual revenue by at least 100 percent. Watson and Rao were also accused of falsely telling prospective investors that well-known and sophisticated investors would be making investments into Ozy Media.
As part of the scheme, the SEC said that Rao impersonated a YouTube executive to try to convince a prospective investor from Goldman Sachs that the company was receiving licensing revenue from YouTube when in fact it was not. The false claim was discovered by the prospective investor.
“We allege that over the course of several years, the defendants raised approximately $50 million from victim investors on the basis of fraudulent documents and repeated misrepresentations, including, at least in one case, falsely impersonating a potential business partner during a meeting with an investment bank,” said Gurbir S. Grewal, the SEC’s Director of Enforcement. “This matter underscores that we will hold anyone accountable, even well-known media personalities, for misrepresentations that impact investors.”
Under the complaint, the defendants were charged with violating the anti-fraud provisions of the federal securities laws and related rules. The SEC is seeking injunctive relief and civil penalties against all the defendants, officer and director bars against Watson and Rao, and disgorgement with prejudgment interest against Ozy Media and Watson.
Rao and Han agreed to resolve the charges against them. Rao consented to the entry of a judgment enjoining him from violating the charged provisions and from serving for ten years as an officer or director of a publicly traded company. Han consented to the entry of a judgment permanently enjoining her from violating the charged provisions. A court will determine monetary penalties against both at a later date.
In a parallel action, the U.S. Attorney’s Office announced criminal charges against Ozy Media, Watson, Rao, and Han. Watson was arrested and charged with conspiracy to commit securities fraud and conspiracy to commit wire fraud. He faces up to 37 years in prison if convicted.
The attorneys at Lewitas Hyman have decades of experience dealing with securities fraud cases and have a deep understanding of how capital markets and financial service firms are intended to work to protect investors. We bring a unique level of knowledge and experience when representing the rights of investors, including resolving cases through arbitration and litigation when necessary. If you think your financial professional or firm engaged in misconduct that caused you investment losses, contact Lewitas Hyman at (888) 655-6002 or through our online contact form for a no-cost evaluation of your matter.