Man charged with fraud over “fake” $3billion Napster investment
He is accused of duping the peer-to-peer music sharing network out of a near 25 per cent ownership stake
by Poppy Burton · NMEAmerican authorities have accused a North Carolina man of conning Napster with an allegedly fraudulent $3billion ownership stake he never had.
Earlier this week (June 11), Billboard reviewed an unsealed indictment from the Department of Justice (DOJ), in which a 57-year-old Charles Cole was charged with three criminal fraud and conspiracy counts.
He was also hit with a separate civil fraud claim from the Securities and Exchange Commission (SEC), which also named his lawyer, Torben Welch, as a defendant.
It’s alleged that Cole had obtained 239 million shares of the digital media company Infinite Reality – roughly 25 per cent of its total shares – by claiming he had access to over $50billion in cash, and promised to invest more than $3billion in the company. Infinite Reality later rebranded to Napster after acquiring the streamer for $207million in March last year.
In the wake of that acquisition, a Forbes investigation raised questions about the identity of the company’s mystery $3billion backer. The following November, Napster’s CEO was said to have told shareholders that the company had been the “victim of misconduct”.
Indeed, federal authorities claim that Cole never gave any money to Napster, largely because he didn’t actually have the funds to do so. Cole allegedly duped them into believing he did by creating a “fictitious paper trail” which used forged bank statements, a fake website, and offshore servers set up to mirror a Malaysian bank’s real site.
“Cole, with Welch’s assistance, then used the fraudulently obtained shares in Infinite Reality to secure a $1million loan from a private third-party lender that he never repaid,” reads the SEC complaint.
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At the time of writing, Cole has not yet responded to the allegations.
Napster’s origins date back to 1999, making waves in the music industry with its peer-to-peer file sharing platform that infamously kicked off a wave of pirating software and applications, later followed by the likes of LimeWire and ThePirateBay.
Later that year, Napster was sued by the Recording Industry Association of America (RIAA) over the illegal distribution of copyrighted materials, and Metallica infamously sued the platform in 2000.
In 2002, Napster filed for bankruptcy, and along with its court order, was shut down. In 2011, Napster was purchased by Rhapsody and relaunched as a paid streaming service. Rhapsody rebranded itself to Napster in 2016.