BROOKLYN (CN) — The defense rested its case in the Ozy Media trial in Brooklyn federal court Tuesday after founder and CEO Carlos Watson concluded his testimony, denying claims he misrepresented the now-defunct company’s revenue to investors.
Watson — who ran the company from its inception in 2012 to its closure in 2021 — denied accusations he lied to investors about the company’s finances and encouraged his co-founder Samir Rao to impersonate YouTube executive Alex Piper on an investor call with Goldman Sachs.
Watson faces charges for conspiracy to commit securities and wire fraud, in addition to aggravated identity theft. If convicted, he could face up to 37 years in prison.
Rao, Ozy’s former chief operating officer, and Suzee Han, the company’s onetime chief of staff, each pleaded guilty to charges last year and are now cooperating with the government in the case against Ozy and Watson. The pair were also named alongside Watson in a separate lawsuit filed by the U.S. Securities and Exchange Commission.
Before the defense rested, Assistant U.S. Attorney Jonathan Siegel grilled Watson on Rao’s conduct at the company.
According to previous testimony from Tripti Thakur, who served as Ozy’s chief financial officer for three months in 2019, Rao sent a fake contract with the Oprah Winfrey Network to a potential bank lender.
Thakur said that Ozy was still in negotiations with the Oprah Winfrey Network at the end of 2019 for a partnership of season two of its show, “Black Women OWN the Conversation,” in which Watson was the host. But Watson, Thakur said, wanted the loan from the bank before the deal with the Oprah Winfrey Network was finalized.
“These guys are going to be dead by the time that we get a contract,” Thakur recalled Watson saying at the time. “You have to get them a contract now.”
“He wanted me to send over a contract that didn’t exist,” Thakur added. “All I wanted him to do was just confirm that’s what he wanted me to do.”
After that conversation, Thakur said she received an email from Rao with the executed contract finalizing the pick-up deal for season two of the show with the Oprah Winfrey Network.
Thakur added that she resigned after receiving the email with the fake contract attached.
“This is fraud. This is forging someone’s signature with the intent of getting an advance from a publicly-traded bank,” Thakur wrote in the resignation email shown in court.
During cross-examination Tuesday, Siegel asked Watson if he fired Rao after learning he faked a contract to a potential bank lender.
“He sent a fake contract to a bank?” Siegel asked.
“He represented to me that it was a mistake,” Watson said, but did not give a direct answer.
Siegel also asked Watson if he fired Rao in 2020, pointing to Watson’s previous testimony that he discovered at that time that Rao had been taking out high interest loans in Watson’s name.
“I’m not sure that’s a firing offense, but okay,” Watson responded.
When pressed by Siegel, Watson said that he didn’t fire Rao in 2020.
Siegel also pointed to the Goldman Sachs call, which became infamous in media circles after it was reported by The New York Times in 2021.
“You didn’t fire Mr. Rao from Ozy, as an employee, in 2021?” Siegel asked.
“That is correct, we put him on suspension,” Watson responded.
Watson added that Ozy’s board of directors elected to remove Rao from the board following the call in 2021.
During re-direct, Watson’s attorney Ronald Sullivan asked if he had the authority to fire Rao after the Goldman call.
“I did not,” he said.
Watson added that Rao was a co-founder and there was a “fairly substantial process to make a move like that.”
The defense team also called Kosmas Kalliarekos, a longtime investor in Ozy, to the stand Tuesday.
Kalliarekos said that he decided to invest because of his belief in Watson and the quality of Ozy’s product.
“I was seeing product that I liked. Interviews that I liked, that engaged me and I felt that the organization and Carlos himself was actually creating something that was very real and something that I could experience,” Kalliarekos said.
He added that he didn’t believe financials of an early-stage company, such as Ozy, were the most important factor when considering an investment of a start-up.
“Looking at financials of a business in the early years of an enterprise may not be an indication of the success of the business,” Kalliarekos said.
He added that he was not dissuaded from investing after learning about the 2021 Goldman Sachs call.
“This didn’t impact the product. To me, the most significant evidence of the reality of the business was what was being produced and I didn’t see anything there that affected the product itself,” Kalliarekos said. “And it felt to me, that that particular article was one competitor attacking another competitor.”
Federal prosecutors will continue their rebuttal case against Ozy and Watson Wednesday. Closing arguments are expected to take place shortly after.