The Feds Are Looking Into Ozy Media: Report

The Feds Are Looking Into Ozy Media: Report
Photo: Kimberly White, Getty Images

Ozy Media, the scandal-ridden media org that is somehow, miraculously still alive, is now being investigated by federal authorities. The New York Times reported this week that both the Justice Department and the Securities and Exchange Commission (SEC) have opened investigations into the company.

According to multiple unnamed sources familiar with the company’s cases, Federal prosecutors have been in contact with “at least one company that had dealings with Ozy,” the Times reported. Meanwhile, SEC investigators have contacted two Ozy-affiliated companies on their own, specifically looking to discuss these companies’ investment ties to the media brand.

While the Times report notes that “the precise focus of the investigations could not be determined,” there’s, uh, quite a lot for federal authorities to choose from. In September, the Times published a blistering expose on Ozy that revealed (among other things) how Ozy co-founder Samir Rao had pretended to be top YouTube executive Alex Piper — who heads the company’s unscripted programming in North America — during a call with a team of potential investors from Goldman Sachs. Instead of being wooed over and dropping their planned $US40 (A$55) million investment, however, the Goldman team rightfully became suspicious of Piper’s voice on the other end, which sounded “strange,” and “digitally altered.”

After chasing down Piper’s team and confirming that, no, Piper wasn’t on the call, and YouTube had no idea what Goldman’s staffers were talking about, the bank did the smart thing and dropped its planned investment. Another early investor, SV Angel, reportedly dropped its stake in the company not long after, and at least two staffers left the company early last month. Ozy’s other co-founder and CEO, Carlos Watson, defended Rao by saying he was in the middle of a “very personal mental health issue.” Rao, meanwhile, has taken an indefinite leave of absence from Ozy.

A mental health crisis can excuse a lot of things, but securities fraud doesn’t seem to be one of them. One Ozy investor, Lifeline Legacy Holdings, hit both the company and Rao with a securities suit last month alleging that it had been duped into dumping over $US2 (A$2.74) million into the media company based on false pretenses.

One of the SEC’s main roles is protecting investors from these sorts of scams, which is presumably why it’s now probing some of Ozy’s business ties. As Bloomberg opinion columnist Matt Levine succinctly put it last month:

The guy impersonated a YouTube executive to trick someone into investing? You’re just not going to get an easier securities fraud case than that, and neither “it didn’t work” nor “he was having a tough time” nor “it only happened once” are generally defences to fraud charges!

Watson, meanwhile, hinted at these probes in an email to investors last month, the Times reports, adding that the company had enlisted the law firm Zuckerman Spaeder to help Ozy “navigate” the ongoing investigations. Watson went on to note that the company is taking a very deliberate approach with the media going forward,” on the grounds that it’s best not to rile up crowds on social media “by responding to any and all inquiries designed to provoke additional rounds of coverage.”

Regardless, we’ve reached out to Ozy and its law firm for comment on the Times story. We’ll update this post when we hear back.