In Latest Twist For Napster, DOJ Says $3 Billion Investor Was Fake

Because its peer-to-peer file sharing software was so revolutionary for music fans, Napster looms large in the minds of a whole generation. Thus, the Napster IP has changed hands many times over the past quarter-century as companies including Roxio, Best Buy, Rhapsody, MelodyVR, and Hivemind have attempted to attach the Napster brand name to on-demand streaming services and internet radio. Most recently, the Metaverse company Infinite Reality bought Napster for $207 million last year with plans to make it "a social and interactive music platform," after which Sony Music sued Napster for millions in unpaid royalties. Now more legal action is underway.

In 2024, an unidentified buyer took on a 25% stake in Infinite Reality, acquiring 239 million shares of the company for a reported $3.36 billion. A Forbes investigation last fall indicated that the money would not be coming through after all after an email from Napster's CEO to employees indicated Infinite Reality had been the "victim of misconduct." Now US authorities are pursuing criminal charges against the alleged fraudster.

In an indictment unsealed Thursday, the Department Of Justice charged Charles Cole, a 57-year-old North Carolina man, with three criminal fraud and conspiracy counts, Billboard reports. The indictment alleges that Cole used a "fictitious paper trail" involving forged bank statements and a fake website to dupe Napster into believing he had $55 billion in assets. Cole, with help from his attorney Torben Welch, "then used the fraudulently obtained shares in Infinite Reality to secure a $1 million loan from a private third-party lender that he never repaid," per the indictment. Cole and Welch are also named as defendants in civil fraud claims from the Securities and Exchange Commission (SEC).

Napster's homepage, meanwhile, is touting features like "AI agents you can see, talk to, and create with," "a 3D holographic display for your AI," and software that "turns your top faculty into AI agents that teach, mentor, and support every student. Every language. Every time zone."