Several former employees of Ozy Media say there is no evidence that the millions of dollars the company received through a federal Covid relief program to protect paychecks ever went to save jobs or boost pay.
Ozy, which has come under scrutiny after numerous reports detailing questionable business tactics, applied for two loans through a program called the Paycheck Protection Program, or PPP, according to the Small Business Administration’s website.
Ozy’s first loan, for $3.75 million, was approved in April 2020, a month after the U.S. government passed a $2 trillion coronavirus relief bill. The company was approved for another $2 million in February 2021.
It is unclear how Ozy used the PPP funds. Ozy Media’s CEO and co-founder, Carlos Watson, did not return multiple emails with specific questions about how the company used the money or who decided how the money would be used. Nor did he answer a question about why Ozy applied for the second loan. The company claimed it made $50 million in revenue in 2020. It laid off several staffers and cut salaries earlier that year.
Ozy announced it was shutting its doors last week after a series of reports cast doubt on the company’s business practices. The New York Times detailed an event from February — the same month Ozy received its second PPP loan — where co-founder and chief operating officer Samir Rao impersonated a YouTube executive on a conference call with Goldman Sachs in hopes of securing a $40 million investment.
“No one to my knowledge, and I’m talking to at least 10 people. No one had anything returned to them by way of salary post them receiving these PPP loans,” according to a former employee who left Ozy earlier this year.
“I must’ve followed up with Samir [Rao] four to six times,” said another with respect to reinstating salary. “It was disheartening. You work so hard and give your life to this company, to be dismissed and disrespected.”
The former Ozy employees who talked to CNBC worked in various departments across the company. They spoke on the condition of anonymity to discuss private matters and in order to avoid retribution.
Watson told Axios in January 2021 — one month before taking the second PPP loan — that his company was profitable for the first time in 2020 after taking in $50 million in revenue. The New York Times first reported Ozy has inflated its traffic numbers and has a history of overstating its success. Watson told CNBC earlier this week that Ozy over-marketed itself about 20% of the time.
“That’s on me, and I own that,” Watson said Monday.
Axios first reported that Ozy laid off around 20% of its staff in early 2020. The news outlet also reported that Ozy implemented pay cuts of around 19%. CNBC has since learned some employees took even bigger cuts, including one person whose salary was cut by 35%, according to two people familiar with the matter.
Watson announced on Monday that Ozy was planning to keep its doors open, just days after he told employees the company would close. Also on Monday, LifeLine Legacy Holdings, which claims to have invested $2 million in Ozy Media, filed a lawsuit against the company, alleging “fraudulent, deceptive and illegal conduct.”