Embattled Ozy Media Hit With First Investor Lawsuit Over Faked Fundraising Call

In the first of what may well become a string of lawsuits against embattled Ozy Media, a fund manager that invested in the site accused it of fraud and asked for compensatory and punitive damages in a jury trial.

LifeLine Legacy Holdings of Beverly Hills, Calif., which put more than $2 million into the company co-founded and led by Carlos Watson, claimed in a lawsuit that Ozy had “engaged in fraudulent, deceptive and illegal conduct” when the firm was considering early this year whether or not to invest.

The suit, filed in U.S. District Court for the Northern District of California where Ozy Media is based, is the latest shoe to drop in an unfolding scandal triggered by a New York Times story last Monday that revealed Ozy media co-founder Samir Rao had impersonated a YouTube executive on call with bankers from Goldman Sachs last February in the middle of a potential fund raise. Watson, who says he was not on on the call, attributed the event to mental health issues of his fellow executive, but the purpose of the impersonation may have been to assure potential investor Goldman that Ozy-produced videos were successful on the giant video sharing platform.

LifeLine said that if it “had known the foregoing facts [of the call it would never have invested in Ozy Media.”

“In 2021, based upon direct assurances concerning Ozy Media’s strong business performance, investments by high profile institutional investors, high viewer metrics, and competent and honest company management, LifeLine agreed to invest in Ozy Media. At the time that LifeLine’s investments were solicited and made, Ozy Media and, more specifically, Samir Rao knew that, in fact, the representations made to LifeLine regarding Ozy Media were untrue and that Rao had fail to disclose material information about Ozy Media to LifeLine,” the suit says.

“More particularly, Ozy Media knew, but failed to disclose to LifeLine that on February 2, 2021 the company, through Samir Rao, engaged in fraudulent, deceptive and illegal conduct when Mr. Rao, while participating in a call with a potential high profile institutional investor, impersonated an executive of YouTube and misrepresented viewership of Ozy Media programming shown on YouTube. Ozy Media also failed to disclose that said high profile institutional investor refused to invest in Ozy Media after learning of said fraudulent conduct and that the company, as a result, was under investigation by various government agencies.”

Last week Ozy Media’s star journalist, former BBC anchor Katty Kay, and its board chair Marc Lasry both stepped down and Watson announced that the company would shut down. But on the Today show yesterday, he walked that back, saying the company was staying open for business but without detailing how, or where it was getting funds to operate. The initial revelations last week have led to other stories questioning the company’s reporting of viewer metrics and data and its characterization of production partnerships.

On Today, Watson slammed Ozy critics from Sharon Osbourne to YouTube. He acknowledged “a tragic situation” but said, “I am grateful, though, that Goldman didn’t invest, because that would have been the worst all.”

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