DOJ charges Charles Cole over alleged fake $3B Napster investor identity

American authorities say Charles Cole, a 57-year-old North Carolina man, duped Napster with an allegedly fraudulent $3 billion ownership stake he never had. According to a DOJ indictment reviewed by Billboard from an unsealed case dated June 11, Cole was charged with three criminal fraud and conspiracy counts, and the SEC also filed a separate civil fraud claim naming Cole and his lawyer, Torben Welch.

The core allegation is stark: Cole supposedly obtained 239 million shares of Infinite Reality, which later rebranded to Napster, claiming access to more than $50 billion in cash and promising more than $3 billion in investment. Infinite Reality later acquired the Napster streamer for $207 million in March last year, and the “mystery” backer became a question after a Forbes investigation raised concerns about the identity of that $3 billion figure.

Here is where the stakes for decision-makers show up, fast. Ownership and control in digital media companies are often treated like a clean math problem: shares in, influence out. But the SEC complaint, quoted in the report, alleges Cole never actually wired the money. Instead, federal authorities claim he used a “fictitious paper trail” to convince others he had the funds, including forged bank statements, a fake website, and offshore servers set up to mirror a Malaysian bank’s real site. That is not just document fraud. It is an attempt to bypass the normal verification instincts that boards, lenders, and counterparties rely on when money is supposed to appear.

The indictment also points to a specific downstream move. The SEC complaint says Cole, with Welch’s assistance, used the fraudulently obtained shares to secure a $1 million loan from a private third-party lender that he never repaid. In other words, this case is not only about getting shares. It is about converting a paper-based lie into real credit and real consequences. For companies and investors, that matters because loan collateral tied to equity positions is supposed to be grounded in legitimate ownership and legitimate funding.

The DOJ and SEC allegations also highlight how these cases can evolve across agencies. The report notes that the SEC’s civil fraud claim was filed separately and named Welch as a defendant as well. When both criminal prosecutors and the securities regulator move, it typically means authorities believe the conduct involved not just a bad bet or a messy transaction, but something that undermines market trust. That is especially relevant in deals where the story depends on a backer’s ability to pay, not just their ability to talk.

The Napster context makes the contrast even sharper. Napster’s origins date back to 1999, when it became known for peer-to-peer music sharing and helped kick off a wave of pirating software and applications, later followed by services like LimeWire and ThePirateBay. Napster was sued by the Recording Industry Association of America over illegal distribution of copyrighted materials, and Metallica famously sued the platform in 2000. In 2002, Napster filed for bankruptcy and, along with its court order, was shut down. Then in 2011, Napster was purchased by Rhapsody and relaunched as a paid streaming service. Rhapsody rebranded itself to Napster in 2016. This history matters because it shows the brand has been through repeated scrutiny and restructurings, and that makes credible capital and credible governance even more critical when the company changes hands again.

The report also mentions what Napster leadership said after the acquisition. In the wake of the Infinite Reality deal, a Forbes investigation raised questions about the identity of the supposed $3 billion backer. The following November, Napster’s CEO was said to have told shareholders that the company had been the “victim of misconduct.” At the time of writing, Cole had not responded to the allegations. Whether Cole disputes the claims or not, the broader lesson is that boards and counterparties often face a question that is easy to underestimate: not just whether a deal is signed, but whether the money behind it is real, verifiable, and replicable when auditors, regulators, or lenders ask for proof.

For executives and investors operating in the music, streaming, and broader digital media ecosystem, this case is a reminder that the weakest link is rarely the spreadsheet. It is the credibility layer around funding. If shares can be obtained through a fabricated paper trail and then used to secure a loan, then diligence cannot stop at “looks legitimate.” It has to include proof that can survive scrutiny, including third-party verification that does not rely solely on documents that can be forged, websites that can be copied, or offshore setups designed to look like legitimate banking infrastructure.