Photo Credit: Napster
It turns out Infinite Reality/Napster’s huge funding round was even more suspicious than we thought: Now, two federal cases are in motion against the individual who allegedly “fraudulently obtained” almost 240 million of the company’s shares.
The U.S. Attorney’s Office for the Southern District of New York formally announced a criminal indictment against the alleged fraudster yesterday, when the SEC filed a related civil complaint. Both cases arrive about seven months after Napster acknowledged that it’d been the victim of “misconduct” in connection with a multibillion-dollar funding round.
As many know, said round generated considerable attention out of the gate – in part because of its size and in part because the deep-pocketed backer’s identity wasn’t immediately clear.
Consequently, multiple outlets endeavored to answer pressing questions about the curious episode, which has thrown Napster’s future into doubt. But in general, notwithstanding these efforts to fill in the blanks, there was quite a lot we didn’t know.
That’s changed with the arrival of the federal cases. On the criminal side, one Charles Cole is accused of wire fraud, conspiracy to commit wire fraud, and conspiracy to commit securities fraud.
According to the indictment, between June 2024 and this past March, 57-year-old Cole “perpetrated a scheme to fraudulently obtain at least 239 million shares from” Napster/Infinite Reality.
Per the indictment once again, a Long Island-based broker – more here in a moment – connected Napster with Cole as it (Napster) was looking to raise around $350 million. Cole then allegedly expressed interest “in acquiring billions of dollars’ worth of Infinite Reality’s shares through direct investment.”
Evidently, the bold declaration set the stage for a funding agreement and a corresponding public announcement.
Cole is said to have helped the purported scheme along with alleged “lies and fabricated documents designed to create the false impression that he had access to billions of dollars.”
Among other things, the defendant allegedly provided Napster with a document “that falsely listed a yearly income of $50 million and net worth of $800 million, and another document, signed under penalty of perjury, falsely claiming that he had $33 billion available for his proposed investments.”
In the end, Cole “took steps to monetize his fraudulently obtained shares,” with one bank having refused to give him a credit line and a different institution having “loaned $1 million…against approximately $45 million of the fraudulently obtained shares,” according to the indictment.
Though this indictment contains additional information about the alleged scheme, the SEC’s securities fraud complaint describes the convoluted plot in comparative detail.
Besides Cole, the SEC action names as defendants his attorney, Torben Welch, and a trio of “shell entities” associated with Cole.
At the top level, Napster/Infinite Reality “has never received any money from Cole despite his promise to invest $3.36 billion,” per the suit. And Cole himself “benefitted from his fraud by retaining at least $552,800 of the” noted $1 million loan.
How exactly did Cole allegedly secure almost a quarter of a billion shares without ever putting up any cash?
In a 2024 letter prepared on his “law firm’s letterhead…Welch represented that he had validated and traced” an astonishing $55 billion tranche allegedly under Cole’s control, according to the complaint.
Also in 2024, “Welch recorded a video of himself logging into a website for ‘Titan Financial’ to substantiate Cole’s wealth,” with the clip allegedly indicating that Cole possessed a $55 billion balance.
“Welch’s video was misleading; the ‘Titan Financial’ website he visited was not associated with any legitimate financial institution, and the account balance he displayed was fictitious,” the legal text reads.
Finally, allegedly false representations about a Malaysian bank account – “Cole told Infinite Reality that he had over $11 billion in an account at a Malaysian investment bank” – played a role in the alleged scam as well.
From there, Cole and Welch in 2025 emails allegedly represented to Napster (which was, of course, eager to receive the committed capital) that funds were at various times being transferred.
“No transfers were in process and none were ever made,” the suit states. “Cole knew this, because he had no such funds to transfer. Welch knew, or was reckless in not knowing, that all of the purported transactions were a sham.”
According to its website, law firm Messner Reeves counted Welch (whose profile has seemingly been scrubbed) as a partner and the head of its Salt Lake City practice. When contacted by DMN, Messner Reeves declined to comment on the SEC complaint.
Next, as highlighted, “a Long Island-based broker dealer” connected Cole and Napster, per the criminal indictment. This presumably refers to Great Neck-based Sterling Equities, which was previously mentioned in connection with the fundraise and didn’t respond to a comment request in time for publishing.
Finally, a Napster spokesperson in a brass-tacks statement touched on the company’s continued cooperation with authorities.
“We have cooperated with law enforcement since the company initially reported it was the victim of misconduct,” the spokesperson said to DMN. “We are continuing to support this process. Questions about the proceedings should be directed to the U.S. Attorney for the Southern District of New York. We have no further comment on an active matter.”
