Lifelong fan Lapping announced in March he was ready to pump up to £1.26million into the club from cash provided by individual investors, but Carlisle have claimed his plans did not bear up to scrutiny.
The club said in a statement: “The proposed investment of £1.26million by a group led by Andrew Lapping has been terminated.
“Heads of terms were drawn up in April this year after lengthy negotiations but several key areas remained incomplete despite specific requests from the club’s lawyers for approval.”
Carlisle recently put talks with Lapping on hold after revealing a mystery billionaire’s interest in the club.
The club have said they are bound by a confidentiality agreement not to reveal the party’s identity but that talks were continuing.
But Lapping’s interest is over despite his claims in March that B#800,000 had already been promised from would-be investors.
The club added: “In a legitimate attempt to check the authenticity of the offer as part of our due diligence procedure, we made personal checks with three of the named investors and discovered that two of them who were listed to provide £250,000 each and another who was listed for B#100,000 had actually only agreed to invest £100,000 in total between them.
“With that information, the trio’s total investment actually fell from £600,000 as laid out on the list to £100,000 in reality.
“Having checked only three of the 12 investors on the list, the £1.26 million total was already down by £500,000 to £760,000, casting serious doubts over whether the full investment could be made.
“This followed warnings we had received from our solicitor in April this year about increasing concerns over the financial commitment.”
Carlisle also announced an immediate restructuring of the club and its board of directors with a new chairman to replace Andrew Jenkins.
The board will also consist of club’s finance controller Suzanne Kidd, who will become finance director, sales and marketing director Phil King and a fans’ representative to be chosen by the fans.