John Fanning, a co-founder and founding chairman of the music-sharing service Napster, created the brand for Netcapital Inc., a Nasdaq-listed fintech company that operates an SEC-registered crowdfunding portal helping small businesses raise money online under Regulation Crowdfunding. Fanning occupied an unusual position at Netcapital: the company publicly labeled him only an “advisor” and gave him no formal officer designation, but the SEC alleges he actually acted as an officer of the company while concealing the extent of his control. His wife, Coreen Kraysler, served as Netcapital’s chief financial officer. Between approximately October 2021 and January 2024, Netcapital improperly recognized nearly $14 million in revenue from consulting agreements that were shams, some of them forged, producing no real revenue for the company while enabling it to more than quadruple its reported revenue as it raised more than $25 million from investors. The overstatement inflated Netcapital’s revenue by approximately 345 percent. On August 10, 2026, the SEC filed charges against Netcapital and five affiliated individuals in the U.S. District Court for the District of Massachusetts.
The SEC’s complaint names, in addition to Netcapital and Fanning, CFO Coreen Kraysler; Martin Kay, a former board member and CEO; Paul Riss, a CPA with substantial responsibility for revenue recognition and financial statement preparation; and Cecilia Lenk, who preceded Kay as CEO and led the Netcapital subsidiary that entered the consulting agreements. The complaint charges the defendants with antifraud, reporting, and certification violations. Lenk, without admitting the allegations, consented to a final judgment imposing permanent injunctions, a conduct-based injunction, and a $50,000 civil penalty. The litigation continues against the remaining defendants.
Eleven Startups That Paid $1M to $2M in Consulting Fees Were Secretly Controlled by Fanning
The engine of the fraud was Netcapital Advisors, the company’s consulting arm, which helped startups prepare for crowdfunding raises by producing logos, pitch decks, websites, business plan advice, and investor introductions. According to the complaint, this arm signed consulting deals with at least eleven startups, each agreeing to pay between $1 million and $2 million, paid in equity rather than cash because the startups had little money. On paper, this looked like a thriving consulting business generating millions in revenue. In reality, the SEC alleges, those eleven startups were secretly controlled by John Fanning himself. The consulting revenue that Netcapital booked and reported to investors was, according to the complaint, money the company was effectively paying to itself through entities Fanning controlled, generating no genuine economic value.
The related-party structure was carefully hidden. Fanning allegedly controlled the startups through intermediary companies, each of which typically stayed below the 20 percent ownership threshold that would have triggered a disclosure requirement under the Regulation Crowdfunding rules. By keeping each intermediary’s stake under that line, the arrangement avoided the disclosures that would have alerted investors and regulators to the fact that Netcapital’s consulting clients were controlled by a Netcapital insider. The company never told investors that the consulting revenue, which was driving its reported growth, came from related-party deals involving Fanning. Some of the underlying consulting agreements, according to the SEC, were outright forged.
A CFO Wife, a CPA Who Ran Revenue Recognition, and Two CEOs Across the Scheme
The complaint distributes responsibility across the roles that made the revenue recognition possible. Coreen Kraysler, as CFO and Fanning’s wife, certified the financial statements that contained the inflated revenue. Paul Riss, the CPA, had substantial responsibility for revenue recognition and for preparing the financial statements that booked the sham consulting income. Martin Kay served as CEO during part of the period. Cecilia Lenk preceded Kay as CEO and served as the principal executive officer of the Netcapital subsidiary that entered into the purported consulting agreements. The SEC alleges that the CFO, the CPA, and one of the CEOs knew of or recklessly ignored the scheme. The Bloomberg Law report noted that the sham deals allowed a company promoting itself as a crowdfunding success story to present investors with revenue figures that were almost entirely fictional at the consulting-segment level.
A Best Crowdfunding Platform Award, $25M Raised, and a Delisting Warning
The irony of the Netcapital case is that the company marketed itself as a trusted gateway for retail investors into private markets. Netcapital’s funding portal was named Best Crowdfunding Platform at the 2022 FinTech Breakthrough Awards, a credential that lent credibility to a company whose own financial statements, according to the SEC, were materially false. The more than $25 million Netcapital raised from investors during the period was raised on the strength of reported revenue that the complaint says was overstated by 345 percent. On the same day the fraud charges became public, Netcapital disclosed that Nasdaq staff had given it until February 1, 2027, to regain compliance with listing requirements governing its stock price and avoid possible delisting. The company that won an award for being the best in its field now faces both an SEC fraud action and the prospect of removal from the exchange. The Regulation Crowdfunding framework that Netcapital operated within is designed to open private investment to ordinary investors, which makes the alleged falsification of the platform operator’s own financials particularly consequential.
Conclusion
John Fanning helped build Napster and then created the Netcapital brand. According to the SEC, he acted as a Netcapital officer while the company called him an advisor, secretly controlled eleven startups that signed consulting deals worth $1 million to $2 million each with Netcapital’s consulting arm, and structured his ownership through intermediaries kept below the disclosure threshold so investors would never learn the deals were with him. Netcapital booked $14 million in revenue from those sham agreements, some forged, and overstated its revenue by 345 percent while raising more than $25 million. His wife signed the financials as CFO. The company won an award for being the best crowdfunding platform in the industry. It now faces an SEC fraud case and a Nasdaq delisting deadline.
