(Bloomberg) – As Ozy Media’s business practices draw attention, the troubled startup has faced multiple legal challenges for allegedly failing to pay its bills, including a claim from a company it hired to grow her online audience.
In a 2018 lawsuit, a company called Boredom Therapy said it was hired by Ozy between August 2016 and February 2018 to “create and drive traffic” to what it called a “mini-website.” Ozy failed to pay for the services, which amounted to approximately $80,000, according to the suit. The parties agreed to end the case in August, and no terms were disclosed.
The lawsuit sheds light on the secret methods some digital media companies use to optimize their online statistics, which can help attract advertisers and investors. In 2017, BuzzFeed News reported that Ozy and other websites were buying internet traffic that wasn’t seen by real people. A recent New York Times article also raised doubts about Ozy’s claims about his online readership.
On its website, Boredom Therapy describes itself as a media startup “with the goal of fighting boredom around the world by engaging our readers with incredibly shareable content.”
Ozy and Boredom Therapy did not respond to a request for comment on the lawsuit.
This isn’t the only lawsuit against Ozy for allegedly not paying his bills. In a lawsuit filed last year, a company called Regis Capital Group said Ozy defaulted on a merchant cash advance, an expensive type of loan for small businesses.
“Daily debits from defendant’s bank account failed or were rejected,” the lawsuit says, adding that Ozy co-founder Carlos Watson personally guaranteed all obligations under the agreement. In the lawsuit, Regis claims Ozy owes him $506,250. Régis ultimately dropped the suit without giving further details.
And a company called Urban Airship sued Ozy in 2019, claiming the media company failed to pay around $3,300 for tech services, including help sending app push notifications. In December of that year, a court ordered Ozy to pay the amount demanded by Urban Airship plus interest, attorney’s fees and other costs. Ozy paid for it at the end of February 2020.
Ozy, which bills itself as a “modern media company”, has been in turmoil since the New York Times reported that co-founder Samir Rao impersonated a YouTube executive during a conference call with potential investors.
The fallout was quick. On Thursday, Marc Lasry, chief executive of investment firm Avenue Capital Group and co-owner of the Milwaukee Bucks, resigned from Ozy’s board. Ozy also suspended Rao, who served as chief operating officer, and hired law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP to review his business operations. One of Ozy’s early investors, SV Angel, led by venture capitalist Ron Conway, told the company it no longer wanted the shares it acquired, according to Axios.
©2021 Bloomberg LP