By Nate Raymond

BOSTON, Dec 9 (Reuters) - The chief executive of a Nashville-based tech startup that purported to develop a revenue-sharing app that would be used by the entertainment industry has been charged with defrauding a private equity firm out of $20 million.

Marcus Cobb, who had been the chief executive of Mozaic Payments Inc, was charged in an indictment unsealed on Monday in federal court in Boston with conspiring to commit wire fraud.

The indictment did not name the private equity firm prosecutors describe as the victim of Cobb's scheme. Mozaic announced in 2023 it had raised $20 million from Boston-based Volition Capital.

Cobb was arrested on Monday and made an initial appearance in Chicago federal court, where he was released on a $125,000 bond. A court-appointed lawyer did not respond to a request for comment, nor did a representative for Volition.

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According to the indictment, Mozaic promoted itself as a technology company that offered customers in the music sector and entertainment industry an application that would process revenue-sharing transactions.

The indictment said the app purportedly would allow for the splitting of a royalty payment from a music-streaming service among an artist, a recording label and a distributor. Yet in reality, the app did not function and generated no revenue, the indictment said.

After the private equity firm contacted Cobb about investing in his company's business, he and a Mozaic co-founder agreed to defraud the investor by misrepresenting Mozaic's profitability using false financial documents and fake customer testimonials, the indictment said.

The scheme succeeded, and the private equity firm in September 2023 provided Mozaic $20 million in exchange for board seats and equity shares, the indictment said.

Cobb and the co-founder then provided the investor with false quarterly financial reports that disguised Mozaic's deteriorating finances while using the investor's money to pay for lavish travel and entertainment, the indictment said.

By February 2025, they had spent nearly all of the $20 million, the indictment said. Mozaic collapsed after the investor discovered the fraud, according to charging documents.

(Reporting by Nate Raymond in Boston; Editing by Stephen Coates)