Linqto, a private investment platform that allows investors to purchase shares of pre-IPO companies, has filed for bankruptcy protection in the United States. The company holds 4.7 million Ripple shares purchased in the private market.
Linqto submitted its bankruptcy filing to the U.S. Bankruptcy Court for the Southern District of Texas on Monday.
This filing follows a clarification statement from Ripple CEO Brad Garlinghouse last week, who noted that Linqto owns 4.7 million secondary market Ripple shares but has no business dealings with the company.
"Aside from Linqto being a shareholder, Ripple has never had a business relationship with Linqto nor participated in our funding rounds," Garlinghouse stated in a post on the X platform.
A spokesperson for Linqto declined to provide information on when the company purchased Ripple shares in the secondary market.
According to data from private market platform Forge, Linqto's holdings of Ripple shares could be worth approximately $450 million when the secondary market stock price is $95.5.
However, a court document filed on Tuesday indicated that Linqto's private securities issuance tool, Liquidshares, holds securities from 111 issuing companies with an "estimated fair market value of over $500 million."
According to Phil Haslett, co-founder of EquityZen, Ripple's secondary market shares may be suspended due to its reported $700 million tender offer.
"Ripple's secondary market shares are typically suspended when the company completes its reported $700 million tender offer at $175 per share," Haslett told Cointelegraph, adding:
Linqto's representatives did not clarify the value of the company's Ripple share holdings to Cointelegraph. Cointelegraph had not received a comment request from Ripple at the time of publication.
Speculation about Linqto's potential bankruptcy first emerged on June 30, when The Wall Street Journal reported that it was facing a federal investigation and a possible bankruptcy filing.
The report suggested that an internal investigation found evidence that "Linqto customers never owned the securities they believed they owned."
The Wall Street Journal cited an internal memo stating that Linqto was also accused of marketing its services to customers who may not qualify to purchase shares of private companies.
"We found many disturbing things about Linqto's previous business practices," Linqto's new CEO Dan Siciliano reportedly said, adding, "These practices are not small isolated incidents, compliance issues, or common regulatory mistakes."
Former CEO William Sarris reportedly attempted to offer Ripple shares to Linqto's 11,000 users at prices at least 60% higher, violating the SEC's prohibition on markups exceeding 10%.
Linqto's initial bankruptcy hearing is scheduled for Tuesday at 9:00 PM UTC, with witnesses including Chief Restructuring Officer Jeffrey Stein, Epiq's restructuring Kate Mailloux, and Jefferies' Senior Vice President of Debt Advisory and Restructuring Ryan Hamilton.
A court document filed on Tuesday detailed how Linqto specifically failed to comply with securities laws by improperly structuring its series of limited liability companies and lacking transfer permissions from issuers like Ripple.
Linqto shut down its platform on March 13, effectively ending its revenue operations. According to court documents, the SEC has since notified the company that it is investigating potential violations by Linqto and its affiliates.
According to Garlinghouse, Ripple stopped approving Linqto's purchases of its secondary market shares at the end of 2024. This move came after the Financial Industry Regulatory Authority (FINRA) completed its review of Linqto's brokerage division, Linqto Capital.
Linqto's former Chief Revenue Officer Gene Zawrotny has also filed a lawsuit against Linqto and its former executives Bill Sarris and Joe Endoso, alleging serious compliance failures and retaliatory actions.
The day before this news was released, Linqto denied allegations regarding changes in the Ripple shares held by Liquidshares, responding to a post by CapSign CEO Matt Rosendin on the X platform.
"Contrary to reports published on the X platform, Linqto confirms that the Ripple shares held by Liquidshares remain unchanged, and as Ripple confirmed last week, Linqto continues to hold 4.7 million shares," Linqto stated in its released statement.
Related: BlackRock iShares Bitcoin ETF holdings surpass 700,000 BTC
Original article: “Ripple Shareholder Linqto Files for Bankruptcy Protection”
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