Linqto Files for Chapter 11 Bankruptcy Amid Regulatory Scrutiny

Linqto, a private investment platform enabling investments in pre-IPO companies, has filed for Chapter 11 bankruptcy protection. The filing was made with the US District Court for the Southern District of Texas on Tuesday. Linqto also holds a significant portfolio of 4.7 million Ripple (XRP) shares purchased on the secondary market.

The filing arrives shortly after Ripple CEO Brad Garlinghouse clarified last week that Linqto possesses the secondary shares but has no operational or business ties to the cryptocurrency company.

Excerpt from Linqto’s voluntary petition for non-individuals filing for bankruptcy. Source: Epiq — An excerpt from Linqto’s voluntary petition for non-individuals filing for bankruptcy. Source: **Epiq**

“ Apart from Linqto being a shareholder, Ripple has never had a business relationship with Linqto, nor have they participated in our financing rounds,” Garlinghouse stated in an X post.

A Linqto spokesperson declined to comment on the timing of its purchase of the Ripple shares on the secondary market.

Valuation data from the secondary market platform Forge suggests the shares, currently priced at $95.5 per share, may represent an asset base of approximately $450 million for Linqto.

However, a subsequent court filing indicated that Linqto’s related investment vehicle, Liquidshares, holds securities from 111 different issuing companies, with an estimated collective fair market value exceeding $500 million.

Ripple’s share price on the secondary market. Source: Forge — Ripple’s share price on the secondary market. Source: **Forge**

Federal Investigation Raises Concerns

Speculation surrounding potential bankruptcy surfaced last Monday following a Wall Street Journal report detailing a federal investigation into Linqto and its possible need for bankruptcy protection.

The WSJ suggested an internal investigation revealed evidence that “Linqto customers never owned the securities they thought they did.” The report further alleged that Linqto marketed its services to potentially ineligible investors, citing an internal memo.

“ Much of what we discovered about the prior business practices at Linqto is disturbing,” reportedly stated Dan Siciliano, Linqto’s new CEO, adding: “These practices aren’t small one-off, compliance or common regulatory missteps.”

Former CEO William Sarris allegedly attempted to sell Ripple shares to Linqto users at a premium well exceeding the 10% markup limit mandated by the Securities and Exchange Commission (SEC), according to WSJ reporting.

First Day Hearing Scheduled

Linqto’s initial bankruptcy hearing is scheduled to commence Tuesday at 9:00 PM UTC. The court listed hearing involves key personnel including Chief Restructuring Officer Jeffrey Stein, Kate Mailloux from Epiq, and Ryan Hamilton from Jefferies.

The Tuesday court filing detailed multiple securities law violations committed by Linqto, including the improper structuring of its series limited liability companies and the absence of required transfer permissions from issuers such as Ripple.

Linqto shut down its primary investment platform on March 13, halting operations. The company is currently under SEC investigation regarding potential securities law breaches involving Linqto and its affiliates.

Separating Linqto from Ripple

Garlinghouse confirmed that Ripple formally ceased approving Linqto’s purchases of secondary shares in late 2024, coinciding with a completion of a regulatory review by the Financial Industry Regulatory Authority (FINRA) of Linqto Capital.

Linqto’s former chief revenue officer, Gene Zawrotny, initiated a lawsuit against Linqto and co-founders Bill Sarris and Joe Endoso, alleging compliance failures and claims of retaliation.

The day following Ripple CEO Garlinghouse’s clarification, Linqto issued a rebuttal statement addressing an X post by CapSign CEO Matt Rosendin. Linqto reaffirmed its ownership of the 4.7 million Ripple shares, stating that holdings are unchanged, despite reports disseminated online.

The news represents a latest development in the ongoing saga surrounding cryptocurrencies and unregulated secondary markets.