Charles Cole indicted for defrauding Napster out of 239M shares

Summary

Charles Cole was indicted on wire fraud and securities fraud charges for allegedly obtaining 239 million shares of Infinite Reality (now Napster) by fabricating bank records and a fake foreign-bank website to convince the company he controlled billions of dollars, with the SEC filing a parallel civil complaint alleging Cole and his attorney falsely claimed to control at least $55 billion in assets while never providing any actual funds.

Market Impact

Prosecutors allege that between June 2024 and March 2026, Cole and associates repeatedly lied about his ability to pay for stock issued in late 2024 and early 2025, after which Cole and attorney Torben Welch pledged nearly 45 million of the fraudulently obtained shares as collateral for a $1 million loan that Cole never repaid, allegedly using forged documents to secure it. Infinite Reality ultimately rescinded all shares issued to Cole and his entities—Beacon Heart, Heart of Humanity, and Avranoc LLC—after discovering the fraud. U.S. Attorney Jay Clayton's statement that 'fraud is fraud, whether in our public markets or our private markets' signals that prosecutors are treating private company stock issuance fraud with the same severity as public market securities violations, with charges carrying maximum sentences up to 20 years.

Why It Matters

The Charles Cole indictment for fabricating billions in fictional wealth to obtain hundreds of millions of private company shares demonstrates how private market stock issuance fraud is being prosecuted with the same rigor as public securities violations.

Key Points

• Charles Cole was indicted on wire fraud and securities fraud charges for allegedly obtaining 239 million shares of Infinite Reality (now Napster) using fabricated bank records and a fake foreign-bank website
• The SEC's parallel civil complaint alleges Cole and attorney Torben Welch falsely claimed to control at least $55 billion in assets and promised to invest $3.36 billion, but never provided funds
• Cole and Welch allegedly pledged nearly 45 million of the fraudulently obtained shares as collateral for a $1 million loan that Cole never repaid, using forged documents to secure it
• Infinite Reality ultimately rescinded all shares issued to Cole and his entities; charges carry maximum sentences of up to 20 years for wire fraud counts

Key Entities

Evidence

Charles Cole, a 57-year-old Mooresville, North Carolina man, was indicted on wire fraud and securities fraud charges for allegedly obtaining 239 million shares of Infinite Reality, now known as Napster, by fabricating...

Supports: Confirms the indictment and the core allegation

Cole falsely promised to invest $3.36 billion in Infinite Reality and, together with Welch, told the company that Cole and Avranoc controlled at least $55 billion in assets.

Supports: Documents the specific fraudulent financial claims

Cole and Welch pledged nearly 45 million of those shares as collateral to secure a $1 million loan from a third-party lender, which Cole never repaid

Supports: Grounds the subsequent collateralized loan fraud