Ozy Media is accused in a lawsuit of ‘fraudulent conduct.’

A fund management company that invested more than $2 million in Ozy Media filed a lawsuit on Monday claiming Ozy “engaged in fraudulent, deceptive and illegal conduct.”

The lawsuit, filed by LifeLine Legacy Holdings of Beverly Hills, Calif., represents the latest challenge for Ozy, which was backed by a bevy of high-profile investors and announced on Friday that it had shut down after its business practices and leadership had come under scrutiny.

LifeLine claims in the lawsuit that Ozy, a multimedia outlet led by the former MSNBC host Carlos Watson, failed to disclose pertinent facts about its business when the fund manager’s executives were considering an investment from late 2020 until February, when it agreed to buy a $2 million stake in the company.

Mr. Watson and Ozy did not immediately respond to requests for comment.

In the suit, which was filed in the U.S. District Court for the Northern District of California, where Ozy Media is based, LifeLine cites a conference call that took place in February between Ozy and Goldman Sachs. On that call, as The New York Times reported on Sept. 26, an Ozy executive apparently impersonated a YouTube executive, in an effort to assure the Goldman team that videos produced by Ozy were a success on YouTube.

In the complaint, LifeLine says that Ozy should have disclosed what had taken place on that call, which occurred before its investment. “Had LifeLine known the foregoing facts it would never have invested in Ozy Media,” the lawsuit says.

In an interview included in the Times report on the matter, Mr. Watson said that the impersonator was Ozy’s co-founder and chief operating office, Samir Rao. He also said that the company’s board was made aware of the incident shortly afterward. Mr. Rao has not commented on the matter.

LifeLine Legacy Holdings is part of LifeLine Financial Group, a firm started by Humble Lukanga, who escaped genocide and famine in Uganda and moved to the United States at age 11. LifeLine manages the money of athletes and celebrities, including the National Football League player Marshon Lattimore and the actress and producer Issa Rae. All told, it oversees some $500 million for about 50 clients, most of them Black, Mr. Lukanga told The Washington Post in August.

LifeLine said in the suit that it was approached by Mr. Rao late last year and that it agreed to invest $2 million in Ozy Media in February after receiving assurances that the company had a “strong business performance, investments by high profile institutional investors, high viewer metrics, and competent and honest company management.” Mr. Rao and Mr. Watson also told LifeLine executives that Goldman Sachs was planning “a substantial investment” in the company, the lawsuit says.

Around May 2021, the lawsuit claims, Mr. Rao told LifeLine that Alphabet or one of its Google affiliates would lead another fund-raising round with a $30 million investment in Ozy Media. LifeLine then made a second investment, buying about $250,000 in Ozy shares as part of that round, the suit says.

In a statement issued by its board on Friday, Ozy announced that it had shut down. But in appearances on NBC and CNBC on Monday, Mr. Watson said he was trying to bring the company back to life. In an email to Ozy subscribers, he criticized the coverage of the company but also expressed some regret, writing, “As deeply proud as I am of the work that our team has done, I also wish we had done many things differently.” He added that he looked forward “to building OZY back stronger, healthier and better.”

On Tuesday, Mr. Watson continued his media tour, saying in an interview on the radio show “The Breakfast Club” that he was a majority owner of Ozy Media’s common stock. He also said in the interview that Google had given Ozy a written offer this year to invest $25 million. Charlamagne Tha God, a host of “The Breakfast Club,” disclosed on the show that he was an investor in Ozy.

LifeLine is seeking a jury trial and has asked that it be reimbursed for all the money it invested in Ozy. It has also asked the court to award punitive damages.

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