Defunct Ozy Media Sues Ben Smith, Semafor, Claims Theft of Trade Secrets

The shell of Carlos Watson’s Ozy Media on Thursday filed a lawsuit against Semafor co-founder Ben Smith, his news site and his former outlet, Buzzfeed, claiming that Smith stole trade secrets from the now defunct news website and then forced its implosion.

The lawsuit filed in Brooklyn federal court also alleges that BuzzFeed breached a mutual nondisclosure agreement it entered into with Ozy in 2019 as part of its efforts to buy the company.

Ozy, which shut down in March following the indictment of founder and CEO Carlos Watson for securities fraud, claims in the suit that Smith, the former media columnist for The New York Times, willfully misappropriated Ozy’s trade secrets “to create, launch, operate, lure investors and advertisers to, and ultimately generate significant revenue for his own media company, Semafor.”

Semafor, the brainchild of Ben Smith and co-founder Justin Smith, the former CEO of Bloomberg News, launched in October 2022, eight months after Ben Smith left the Times. Its stated target audience was college-educated readers seeking unbiased news.

Ozy claims that while the Smiths “laid out a vision that seemed new and never-
before-seen,” in reality, “Semafor was a spitting image of the media company that
Carlos Watson had formed a decade earlier: Ozy.”

“And it turns out that Ben Smith, while editor-in-chief of BuzzFeed, had gotten a months-long look at exactly how OZY operated when BuzzFeed tried to buy it,” the suit claims.

The suit recounts Buzzfeed’s financial difficulties in 2019, quoting news stories about the outlet’s news division shedding $100 million and Ben Smith’s fruitless efforts to find a deep-pocketed investor. “Plan B,” the suit claims, was to target new media startups for acquisition, an effort that also failed.

“In contrast to BuzzFeed’s freefall, 2019 was shaping up quite differently for
Carlos Watson and his media venture, Ozy,” the suit claims, critizing BuzzFeed’s “clickbait, memes, and pseudo-news ‘scoops,’” and claiming that Watson’s website “figured out how to create original, premium content” across multiple platforms, it’s awards program and events business. “Ozy’s audience was more diverse, educated, and engaged than BuzzFeed’s,” the lawsuit claims.

Ben Smith himself targeted and approached Ozy for acquisition, the suit states, revealing an email from BuzzFeed CEO Jonah Peretti to Watson that claimed, “Ozy is the missing piece and you are the missing leader” to “build the future of media.”

The two companies signed a mutual nondisclosure agreement on Sept. 13, 2019, the suit said, giving BuzzFeed execs, including Ben Smith, access to its financial records, lists of advertisers and investors, audience and traffic measures and more. “In short, BuzzFeed got exactly what it wanted: the entire playbook and operating manual for Ozy.”

From October 2019 through January 2020, the suit claims BuzzFeed made a “series of escalating offers” to buy Ozy, ultimately reaching $250 million plus $30 million in incentives for Watson, including a job as president and seat on the board of the combined company. Watson nevertheless turned down the offer.

The lawsuit claims that by summer 2021, Ozy was drawing an average audience of 70 million across its platforms and had closed more than $250 million in advertising deals, won an Emmy “and was barreling toward a $2 billion valuation in its upcoming Series E financing round.”

Meanwhile, Ben Smith jumped ship and moved to The Times, where in late September, he wrote a series of pieces that the lawsuit describes as “falsely accused Ozy of being the ‘Theranos’ of media companies, with a fake product, no real audience and minimal actual value.”

The eye-popping story accused Ozy COO Samir Rao of impersonating a Google executive on a fund-raising call with Goldman Sachs, of vastly inflating its web and video traffic and raising millions of dollars over a faked “Potemkin village” of media content. It said Ozy reached short of 2.5 million people in 2018, but by July 2021 saw its audience shrink to 479,000 and detailed other inflated claims related to video views.

Watson at the time called the report “a bullshit ad hominem attack.”

Yet follow up reports by a number of different outlets found that Ozy claimed some high-profile investors it did not have, including rocker Ozzy Osbourne and his wife Sharon; falsely claimed to corporate partners about A&E airing a Watson-hosted TV show, then later saying it would air on Amazon Prime and later that it had been “sold” to YouTube, and a series of other questionable actions. A cascade of board resignations accompanied the reports.

The reports “devastated Ozy,” the suit states, forcing it to suspend operations within days.

The suit points out that Smith retained an equity stake in BuzzFeed, which was in a position to benefit from the negative stories about a rival, and claims he lied about his role in the takeover talks. After BuzzFeed’s 2021 IPO, the suit claims, Smith “cashed in,” and used those profits the following month to announce the launch of Semafor.

“Within a year of its launch, Semafor had raised over $30 million in capital
(including from affiliates of former Ozy investors) and was ‘outpacing’ its revenue projections,” the suit states. “Meanwhile Watson, his family, and the others who invested everything they had into Ozy have been left with nothing.”

The suit aims to “recoup the catastrophic damages” caused by Smith and “recover the profits” that the defendants reaped “as a direct result of their misconduct.”

Smith and Semafor did not immediately respond to a request for comment Thursday.

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