Carlos Watson, the founder of the troubled digital start-up Ozy Media, was arrested Thursday on federal fraud charges as part of what prosecutors say was a scheme to prop up the financially struggling company. 

Federal agents arrested Watson at a Manhattan hotel after two of the company’s top executives pleaded guilty this month to fraud charges, including Ozy’s then-chief operating officer, Samir Rao, who allegedly impersonated a YouTube executive during a pitch to Goldman Sachs, a potential investor.

Ozy, which was founded in 2013, had touted “being ahead of the curve” and “never [telling] a story that another national or international publication has already covered.” But the company hemorrhaged millions of dollars before it shut down amid revelations of possibly deceptive business practices.

The indictment unsealed Thursday in U.S. District Court in Brooklyn accuses Watson of conspiring to commit securities fraud and wire fraud, as well as identity theft for his role in the impersonation of several media executives.

Ozy advertised itself as a progressive digital platform, but it imploded under insurmountable debt, forcing it to rely on high-interest loans and to more aggressively court investors. It had also faced scrutiny about the size of its audience, with Watson claiming in 2021 that it had 25 million subscribers to its newsletters — more than the New York Times.

In a parallel civil case, the Securities and Exchange Commission also charged Watson and the company with defrauding investors of about $50 million “through repeated misrepresentations concerning the company’s basic financial condition, business relationships, and fundraising efforts.”

For instance, Watson and others “routinely and purposely presented prospective investors with false financial information that grossly inflated Ozy Media’s annual revenue by at least 100%,” the SEC said.

Guilty pleas 

The SEC said Rao and Ozy’s former chief of staff, Suzee Han, have “agreed to resolve the charges against them,” as they did sep