BROOKLYN (CN) — Now-defunct Ozy Media sued BuzzFeed and its onetime editor-in-chief Ben Smith and BuzzFeed in Brooklyn federal court Thursday, claiming the media executive stole company trade secrets to start Semafor, a global news organization launched in October 2022.
In the complaint, Ozy Media claims Smith gathered information on the now-inactive media platform while he was editor-in-chief of BuzzFeed. In August 2019, Smith initiated conversations between BuzzFeed CEO Jonah Peretti and Ozy Media founder Carlos Watson.
Smith was also tasked by Watson to try to secure an investment from Laurene Powell Jobs, the widow of Apple founder Steven Jobs and a known new media investor. But Smith couldn’t close the deal.
“Smith was more than mere matchmaker for Peretti and Watson; he played a central role in the diligence process, as would be expected for someone who held significant equity in BuzzFeed,” Ozy Media says in the complaint. “Among other things, Smith strategized with Peretti on how to approach Powell Jobs, and extracted information from Watson about Ozy’s large advertising contracts and events business.”
As editor-in-chief, Ozy Media says, Smith was given access to information about Ozy’s financial records, revenue streams, lists of investors and advertisers, audience and traffic metrics and unique methodologies and strategies for pitching investors and securing advertisers.
From October 2019 until January 2020, BuzzFeed made a series of escalating offers to buy the media company, ultimately offering a package that included a $250 million purchase price plus $30 million in specific incentives. The offer also named Watson as president and gave him a spot on the board of directors.
But Watson decided to decline the offer.
“Ozy was building something special, and Watson was not ready to put his dream in the hands of someone else just yet — much less BuzzFeed,” Ozy says in its complaint.
Smith announced he would resign as BuzzFeed’s editor-in-chief days after Watson declined Peretti’s last offer, becoming a media columnist at The New York Times.
As a columnist, Smith wrote an article about Ozy, saying its co-founder and COO Samir Rao had impersonated a YouTube executive on a Goldman Sachs reference check when the investment company was considering a $40 million investment in the media platform.
Ozy says Smith falsely characterized the Goldman deal and downplayed the legitimacy of Ozy’s content, value, and numbers. They also say he misrepresented his involvement in BuzzFeed’s efforts to buy Ozy.
A week after Smith’s article came out, Ozy shut down.
In additional articles published by Smith, he also said Ozy was nothing more than a “scam and hype,” and said Watson was the latest version of Elizabeth Holmes, the Theranos founder who was sentenced to 11 years in federal prison after being convicted of misrepresenting the benefits of her company’s blood-testing device.
This year, the federal government brought a criminal indictment against Ozy Media following Smith’s reporting, accusing the company of lying to investors about business relationships, finances and fundraising.
Watson has denied the accusations, but Rao and ex-chief of staff Suzee Han pleaded guilty to charges relating to their roles in the fraud scheme.
As a result of Smith’s reporting, Ozy claims it was devastated and forced to suspend operations. Smith also maintained stock options at BuzzFeed and, when the company kicked off its initial public offering and went public in December 2021, Smith secured some of the profits.
“The next month, armed with his BuzzFeed profits and everything he learned about Ozy’s secret playbook for launching, operating, and generating revenue from a multi-platform, cross-functional media company, Ben Smith and his new partner Justin Smith announced Semafor,” Ozy says in its complaint.
In its complaint, Ozy says Semafor’s model was based on the “same audience, journalism focus, multi-platform emphasis, investor demographic, and advertiser type that Ozy had pioneered over the previous decade.”
Ozy also claims Semafor’s revenue generation model was “eerily familiar,” centering on direct-sold advertising and event sponsorship revenue.
“Ozy had spent years developing its playbook for operating and generating revenue from its cross-functional multi-platform media company, and Semafor had employed the very same playbook right out of the gate,” Ozy says in its complaint. “Ben Smith did not just take the proverbial page out of the Ozy playbook: he took the entire playbook.”
Claims include violations of the Defend Trade Secrets Act, misappropriation of trade secrets and breach of contract. Ozy seeks an injunction barring Smith, BuzzFeed and Semafor from using or disclosing Ozy's trade secrets, compensatory and punitive damages and accounting.
It's represented by Alexander Sakin of New York.
Follow @NikaSchoonover
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