Ozy Media is sued for fraud by Beverly Hills fund that invested $2million

Ozy Media has been sued for fraud by a Beverly Hills fund manager which invested $2million into the media company earlier this year after being ‘targeted’ by co-founders Samir Rao and Carlos Watson.

LifeLine Legacy Holdings filed a fraud lawsuit against the company and Rao on Monday, claiming he knowingly lied to them to secure an investment of $2.2million earlier this year by claiming Google and Goldman Sachs were also investing in them when they weren’t. 

The holding company is registered in Delaware but has offices in Beverly Hills. It’s unclear how Rao and Watson targeted its bosses, but they are the first investors to sue since Ozy Media’s reputation was shattered by a New York Times article last week that detailed how Rao impersonated a YouTube executive on a February 2 conference call in a failed attempt to win investment from Goldman Sachs.  

Exactly how many real investors Ozy Media has and who they remains unclear but they include Laurene Powell Jobs, wife of the late Apple founder Steven Jobs, venture capitalist Ron Conway and former Google exec David Drummond. 

LifeLine, claims in its lawsuit that Rao and Watson told them Goldman Sachs was positioned to make a ‘substantial investment’ in late 2020.  

On February 24, 22 days after the ill-fated conference call, LifeLine filed papers with the SEC to invest $2million in Ozy, unaware of what had happened on the call or the fact that Goldman Sachs retreated from the deal afterwards. 

The lawsuit says both Rao and Watson ‘personally solicited’ LifeLine first for $2million at the end of 2020.  

It chose to invest because they claimed Goldman Sachs was poised to make a ‘substantial investment too’, the lawsuit says. 

Samir Rao

Ozy Media co-founders Carlos Watson (left) and Samir Rao (right) have been sued for fraud by a Beverly Hills fund manager that invested $2.2million in their media company earlier this year

LifeLine Legacy Holdings LLC is based in this building in Beverly Hills. The fund manager invested $2million in Ozy Media in February and then an additional $250,000 in May

LifeLine Legacy Holdings LLC is based in this building in Beverly Hills. The fund manager invested $2million in Ozy Media in February and then an additional $250,000 in May 

In May, Ozy asked for an additional $250,000 and claimed at the time that Google and/or its parent company Alphabet was about to invest $30million in them.  

LifeLine agreed to invest the additional $250,000 on the basis that Google was investing, according to the lawsuit. 

It’s unclear if Google ever did invest in the company, or if it was ever planning to. A spokesman did not immediately respond to inquiries on Tuesday. 

‘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,’ the lawsuit reads. 

The Times article was published on September 26.

It detailed how Rao had impersonated YouTube executive Alex Piper on February 2 – 22 days before LifeLine invested. 

Rao, impersonating Piper, told the potential investors how Ozy Media videos performed well on YouTube, giving them reason to invest. 

Billionaire investor Marc Lasry resigned as Ozy Media chairman last week

Billionaire investor Marc Lasry resigned as Ozy Media chairman last week 

But Goldman’s executives on the call were suspicious of the fact that it happened over conference call and not video, and that ‘Piper’s’ voice sounded altered. 

One of them emailed the real Alex Piper through a verified address at YouTube, and was told that he had never taken part. 

Goldman then confronted Ozy Media and in response, Watson apologized. He said Rao had had a ‘mental health crisis’ and that the company helped him through. 

Goldman chose not to invest and it’s unclear if they took any further action. 

Rao continued working at Ozy Media and, according to the LifeLine lawsuit, pursuing investments. 

He has not been seen or heard from since the Times article was published last week, but a statement from the company’s board said he has been asked to take a leave of absence pending the outcome of an internal investigation.

Last Monday, the day after the article emerged, Watson held a call with staff where he told them Ozy was closing doWn and that all their jobs were lost. 

Then yesterday, he went on NBC’s Today show to insist they were staying open, having reconsidered their position over the weekend. 

The staffers are refusing for fear of future problems. 

In the lawsuit, LifeLine claims that further controversy is inevitable given the slap-dash pivot over the last week. 

Carlos has gone completely rogue…there does not appear to be a plan 

‘In light of the short period of time between the public disclosure of Rao’s fraudulent conduct and the decision to first, wind down the affairs of the company, only later to reverse course, Lifeline suspects that additional illegal improper or otherwise inappropriate conduct occurred at the company prior to when LifeLine made its investments and that were not disclosed to LifeLine.’ 

The law firm that Ozy Media hired to carry out an investigation is no longer working for them because the board members who hired them are no longer there. 

Last Tuesday, the company’s board announced it had hired New York-based firm law firm Paul, Weiss, Rifkind, Wharton and Garrison to investigate the multimedia company’s business and leadership practices.  

A source told The New York Times on Tuesday however that the investigation was over. 

Staffers who were fired by Watson on a five-minute call last week are also vowing never to go back to the company, despite his promise that it is ‘open for business.’ 

‘There does not appear to be a plan. Carlos has gone completely rogue.

‘The entire editorial staff is done with him — who would possibly go back? Who the hell is going to want to go on The Carlos Watson Show now?’ one former staffer told The Wrap. 

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