Charles Cole: The $3 Billion That Never Existed

Derek: Welcome to Vaporware. I'm Derek, he's Grant, and today's episode is one for the ages. Grant: That's a big setup. Derek: Okay, so get this. Napster. Yes, that Napster, the thing that blew up the music industry in 1999, got acquired last year for $207 million by a Florida XR startup called Infinite Reality. Grant: Sure. Zombie brand gets a new owner. Classic Silicon Valley move. Derek: Right; but then Infinite Reality announced a three billion dollar investment round from a mystery investor-no name, just three billion dollars. Grant: No name attached? Derek: No name. Grant: The math doesn't work and everyone knows it. Derek: Wait, Wait, it gets so much worse. The DOJ unsealed the indictment on June eleventh, Billboard covered it; a fifty-seven year old from Mooresville, North Carolina walked away with two hundred and thirty-nine million shares of the company. Company. Roughly twenty-five percent of it. Grant: Shut up! Derek: How? Fake bank records, forged documents and, wait for it, a fully functional fake Malaysian bank website running on offshore servers where Infinite Reality executives could actually log in and see a fake account. Grant: Someone built that? Derek: Someone built that. Grant: Wow! Derek: And the company was already using this investor's phantom billions to justify it. Buy a twelve point two five billion dollar valuation and close the Napster deal. Grant: So the acquisition happened on money that didn't exist. Derek: And then there's a second fraud layered on top of the first, a CEO whose credentials Harvard and the University of Florida both denied, and seven hundred shareholders on a Zoom call getting the news that the money was just gone. Grant: Okay, start from the beginning. Derek: Let's go back to what Napster even was when this deal started. Started. Napster, 1999. Shawn Fanning, a dorm room, and roughly 80 million people suddenly sharing music for free. The record labels came down on it like a ton of bricks, and by 2002, the company was dead. Grant: Dead-ish. Derek: Dead-ish, right. The brand kept getting passed around like a hot potato nobody actually wanted to eat. Best Buy picked it up, then Rhapsody, then a company called MelodyVR, then a firm called Hivemind. And finally, in March of 2025, a Florida XR startup called Infinite Reality bought it for $207 million. Grant: Okay, so what does Infinite Reality actually do? Derek: That's harder to answer in practice. They pitched themselves as an immersive tech and AI company. 3D virtual concerts, XR experiences, enterprise metaverse tools. Variety and Music Business Worldwide reported the acquisition price was $207 million. Grant: Sure, but like the business. Derek: Forbes reported actual revenue of around seventy five million dollars; the company was claiming a valuation of fifteen point five billion dollars. Grant: So a two hundred times revenue multiple? Derek: Yeah, yeah, yeah-and almost all of it built on all stock acquisitions, not cash; by mid two thousand twenty four, they'd spent over eight hundred million dollars in stock on deals: Drone Racing League, LandVault, a bunch of others. Grant: The stock they printed themselves. Derek: Basically; and Forbes also found Grant: What? Derek: that CEO John Acunto listed Harvard and the University of Florida on his credentials. Both schools denied he ever attended. Grant: Shut up! Derek: Both of them-on the record. Grant: So the company buying Napster has a CEO on a resume that doesn't check out, a valuation that's two hundred times revenue, and they're funding acquisitions with shares instead of cash. Derek: That's the environment; and then they needed real money, like actual dollars, to keep the machine moving. So the question becomes, when a company's already this comfortable with opacity, what happens when someone shows up He goes up claiming to have three billion dollars. Grant: Oh, that's a bad combination. Derek: Wait for it. So with all that opacity already baked in, enter Charles Cole, Fifty-seven years old, Mooresville, North Carolina. A broker introduced him to Infinite Reality in mid twenty twenty four while they were trying to raise around three hundred and fifty million dollars. Grant: Wait, a broker just introduced this guy like, Hey, I know a guy. Derek: Basically. And Cole's opening move is honestly kind of audacious. He says: How about I hand you a $1 billion bond in exchange for $350 million in stock? Grant: That's the whole opening bid-a bond? Derek: A bond he could not monetize, attempts to convert it failed; so Cole-and this is the part that fascinates me-doesn't retreat, he escalates. Grant: Of course he does. Derek: He pivots, tells them he wants to buy billions of shares directly, and then submits documents claiming a fifty million dollar annual income and eight hundred million dollar net worth. Grant: Wait, wait, wait-hold on. Those are specific numbers-did nobody Speaker 3: check? Derek: I mean what are you checking against? He's a private individual, no public filings, and he's got a lawyer vouching for him. Grant: OK, but then he says what-just 'Trust me; I'm very rich'? Derek: He says he controls fifty five billion dollars in cash. The SEC complaint says Cole and his attorney Welch told Infinite Reality that Cole's entity, Avranoc, held at least fifty five billion dollars in assets. He promised to commit three point three six billion to the company. Speaker 4: Fifty five billion! Derek: In cash; and across multiple accounts. Now here's what gets me psychologically: the first scheme failed, so he doubled down with a number so big it almost dares you to disbelieve it. Speaker 4: It's a confidence trick in the literal sense: the bigger the claim, the harder it is to call someone on it to their face. Derek: Exactly. An Infinite Reality bit. In July twenty twenty four they put out a press release. Announcing a three hundred and fifty million dollar minority investment from a private multifamily office valued the company at five point one billion dollars and no name attached to the investor. Speaker 4: So the press just ran it? Derek: Ran it, no name, no verification, treated it like a done deal. The money, of course, was never there, but nobody knew that yet. Speaker 4: So now there's a phantom three billion dollars sitting on the books in a company that's about to start building a Round it. Derek: Round it. Grant: And Cole still needed to make it real; what he built to do that-fake banks, offshore servers, forged documents-that's where this gets seriously dark. So let's talk about the actual machinery here, because Cole didn't just lie and hope for the best; he built props. Speaker 4: Props, like a stage magician. Grant: Exactly like that. The DOJ indictment says when payments predictably never arrived, Cole told Infinite Reality the money was sitting at a second bank-this one in Malaysia-and that he'd already opened an account there in the company's name. Speaker 4: So the first bank didn't work, so he just invented a second bank? Grant: Not just invented, he built it. Speaker 4: Wow! Grant: Cole and a conspirator set up offshore servers hosting a fake website that mirrored the real Malaysian bank's site. Login page, account balances, the whole thing. Infinite Reality executives got a welcome email, logged in and saw what looked like a funded account. Speaker 4: Hold on! They actually logged in? Grant: They logged in to a fake portal on a server Cole controlled, showing them a number he made up. Speaker 4: Did nobody just call the bank? Grant: That is the question, and the indictment doesn't answer it, which is somehow worse. Music Business Worldwide reported that Cole even texted a conspirator, asking if the mirror server was up and running so that we can add an account and go live. This was coordinated. Speaker 4: So the verification tool was the fraud. Grant: That's the whole operation; and there was paperwork on top-one forged letter, cited directly in the indictment, claimed Cole was-and I'm reading this verbatim-"ready, willing and able to fully fund the three point three six billion dollar transfer, capitalized, like a contract. Speaker 4: Very professional; completely reassuring. Grant: He even directed a conspirator to fix mismatched Speaker 3: files. Grant: Attach formatting on the forged statements so they'd match the others. This is detail work. Speaker 4: That's what gets me-the duration more than anything. The DOJ says this ran from June, twenty twenty four, through March, twenty twenty six. That's not a con, that's a two year job. Grant: Twenty one months of Infinite Reality issuing shares, waiting for money that was never coming, and keep in mind, what they did with those shares during that window, that's where things get seriously ugly. Speaker 4: Mm-hmm-two hundred and thirty nine million shares, roughly a quarter of the company, and none of it paid for. Grant: That's the number-and Cole's attorney Torben Welch, who the SEC also named as a defendant, was right there with him. The next chapter is what they actually did with all that equity. So Cole walks away with two hundred thirty nine million shares, roughly twenty five percent of the company, and paid exactly zero dollars for them. Billboard reported on the DOJ indictment that Infinite Reality issued those shares in late twenty twenty four and early twenty twenty five and never saw a cent. Speaker 4: And what does a guy do with a quarter of a company he got for free? Grant: Oh, he gets creative. Cole and his attorney, Torben Welch. Take about forty five million of those shares and pledge them as collateral for a loan. Speaker 4: Wait-how big a loan? Grant: A million dollars. Speaker 4: The guy used fake shares he got for nothing to borrow a million dollars he also did not repay. Grant: Wright and Welch, the attorney, allegedly provided the lender with forged documents to make the whole thing look clean. The SEC's complaint spells it out, a con layered directly on top of the original con. (gone) Speaker 4: So the fraud has a sequel. Grant: (spiritual successor) Speaker 4: But while all of this was happening, the press release had already done its job. Grant: That's the part I can't get past. Infinite Reality used that announced three billion dollar raise-the phantom billions-to close the Napster acquisition in March twenty twenty five. Two hundred seven million dollars. Speaker 4: And the whole Tech press ran the raise as a fact; nobody asked who the investor was. Grant: Forbes pushed eventually, but at deal close the company put out a valuation of twelve point two five billion dollars off the back of a funding round that the DOJ and SEC say never actually funded. Speaker 4: So they bought a real company with real money using a valuation built on fake money. Grant: And then rebranded the whole thing as Napster, which is almost poetic, a company that once stood for taking things without paying. is now at the centre of a scheme where someone took equity without paying. Speaker 4: Oh, that's-that's actually landed. Grant: Infinite Reality eventually rescinded all two hundred thirty nine million shares once they figured out the misconduct, but the Napster deal had already closed months earlier. Damage done. Speaker 4: The question is, how long did any of this go public? Because at some point somebody had to notice. Grant: That's exactly where this goes. a CEO's internal email, a Forbes story, and then a federal indictment unsealed last month. So the unravelling started not with an internal audit, not with a compliance team; it started with Forbes. Speaker 4: Of course it did. Grant: Spring of twenty twenty five: Forbes publishes an investigation into the mystery investor; creditor lawsuits over unpaid bills; SEC scrutiny; and a three billion dollar backer whose identity nobody could confirm. Infinite Reality's response? One hour after the piece drops: They name Sterling Select a separate VC firm as the legitimate investor. Speaker 4: Wait, so they'd been sitting on that name the entire time? Grant: Apparently, the timing was, let's call it reactive. Speaker 4: That's one word for it. Grant: Then, November, twenty twenty five CEO John Acunto holds an online shareholder meeting-about seven hundred people on the call-and tells everyone the mystery investor is not Not coming through." After the call, Forbes reported, the company sent an email describing itself as "a victim of misconduct. Speaker 4: A victim! They gave away roughly twenty five per cent of the company and that's how they found out? Grant: Yeah. No internal trip wire, no bank verification-a journalist asked hard questions and the whole thing fell apart. Speaker 4: The math doesn't work and everyone knows it, but nobody checks until the report. But a reporter does. Grant: And then, June eleventh this year, the DOJ unseals the indictment. Billboard reported that Cole faces wire fraud, conspiracy to commit wire fraud, and conspiracy to commit securities fraud. The DOJ and SEC filed simultaneously. Criminal? Derek: in civil charges on the same day. Grant: Hold on, same day, both agencies? Derek: Same day. And the DOJ press release from the Southern District of New York is pretty blunt about it: "US Attorney Jay Clayton: 'Fraud is fraud, whether in our public markets or our private markets. Grant: What are we talking sentence wise? Derek: Why are fraud counts each carry a maximum of twenty years? The Securities Fraud Conspiracy? Five years on top of that. Call was presented in North Carolina that morning; case assigned to Judge Vernon Broderick in the Southern District of New York. Grant: Twenty years for shares that cost him nothing! Derek: The criminal time line ends there. The charges are filed, the shares are rescinded. But what keeps me up at night isn't coal, it's that this ran from June twenty twenty four, to March twenty twenty six, nearly two years. And a media investigation caught it before the company's own systems did. Grant: Which raises the bigger question: was this just one clever guy or was the environment already set up to let him walk right in? Derek: So stepping back from the timeline, the thing Cole actually built wasn't that sophisticated-a website on offshore servers, some forged letters. The tooling was cheap; what wasn't cheap was the environment he walked into. Grant: And that's the part that's to make everyone uncomfortable. Derek: Infinite Reality was already running a valuation that Forbes reported went from $1 billion in 2022 to $55 billion. mostly through all stock acquisitions. No cash changing hands, just deals inflating numbers. Grant: Right. So the math was already fiction before Cole showed up. Derek: Exactly. And their CEO's credentials, Harvard, University of Florida, both denied he'd attended. That's not Cole's doing, that's the baseline. Grant: So when a $3 billion mystery investor with no name attached walks in the door, what's the actual due diligence? Due diligence process supposed to look like? Derek: I mean, you call the bank directly, not through a portal the investor gave you. You find the SWIFT code independently. You wire a test transaction. You get a relationship manager on the phone. Grant: A phone call, that's it, someone picking up a phone. Derek: And nobody did that for two years. Grant: Two years. Derek: Because Infinite Reality needed the story to be true. A three billion dollar check is exactly what you need when you're burning through acquisitions and chasing a sixteen billion dollar valuation. Grant: Wow! Derek: Cole didn't manufacture the appetite; the appetite was already there. Grant: That's the part that I can't shake-the con only lands because the target has already decided to believe-you don't scrutinize the thing you desperately want. Derek: We've seen it every episode: founder mythology, opaque investor structures. Press releases treated as due diligence? Cole didn't INVENT any of that, he just walked through a door that was already open. Grant: The man from Mooresville, North Carolina, facing up to twenty years, he read the room perfectly. Derek: Yeah, and the question that sticks, the one I can't answer, is whether Infinite Reality ever really wanted to know the truth. Grant: You either see it coming or you don't, and sometimes you choose not to. Derek: All right, that's a wrap on Vaporware, again. Which, honestly, feels like the right way to end a story about a company that just refuses to stay dead. Grant: The one thing that keeps getting me, Cole built a fake bank website and held an entire company hostage for nearly two years. Nobody checked. Derek: And the press ran the $3 billion headline with no investor name attached. No name! That's the detail I can't shake. Grant: Due diligence is apparently optional when the number is big enough. Derek: Apparently. Look, the takeaway here is simple: a desperate valuation gap is an open invitation. Cole didn't create the conditions, he just walked through a door Infinite Reality left wide open. Grant: Every time. Derek: If this episode made you double check a pitch deck, tell someone else who should. Subscribe wherever you listen and a review goes a long way. WAY. Grant: Thanks for being here. We'll see you next time. Derek: Later, everyone.