Linqto Ex-CEO Faces Securities Fraud Lawsuit Over Unlicensed Sales

William Sarris, the former CEO of Linqto, is facing a securities fraud class action lawsuit filed by John E. Deaton, a prominent advocate for Ripple. The lawsuit, filed on behalf of thousands of retail investors, alleges that Sarris orchestrated a multi-year scheme involving undisclosed markups, misleading exemptions, and unlicensed sales tactics to sell shares in private companies like Ripple and Kraken through special purpose vehicles (SPVs) on Linqto’s platform. The lawsuit claims that Sarris ignored internal legal memos from 2023 and 2024 that warned of violations of multiple SEC and FINRA rules, including acting as an unregistered broker-dealer and running unregistered investment companies.

Deaton’s lawsuit targets Sarris personally, meaning it is not subject to bankruptcy protections. The lawyer has vowed that any recovery from liability insurance or settlement will be used to compensate innocent investors. This filing follows another lawsuit by former Chief Revenue Officer Gene Zawrotny in October 2024, who alleged internal and systemic compliance failures and claimed he was dismissed after raising concerns. Linqto has since filed for Chapter 11 bankruptcy, citing “serious defects” in its corporate structure and operations, which have raised questions about what customers actually own. The company is currently under SEC and FINRA investigations.

New managers of Linqto, who took over in recent months, have put the company under court protection in Houston due to the scandal. Sapien Group, an Australia-based investment firm, has stated that it has the support of 52% of shareholders for its campaign to challenge the current managers in bankruptcy. Sapien has consulted bankruptcy lawyers to advise on whether to try to dismiss the Chapter 11 petition or take other actions. Regardless of the outcome, Sapien claims its objective remains unchanged: to preserve the value of Linqto and the value of the shareholders’ investments.

The US Securities and Exchange Commission’s (SEC) investigation into Linqto and whether its former managers failed to do due diligence to ascertain if its customers were accredited investors with sufficient financial backing to invest through the company continues. According to company bankruptcy attorney Samuel A. Schwartz, Linqto’s advisers are planning to use the bankruptcy process to raise funds to repay customers and other creditors. Before presenting a detailed proposal to creditors for a vote, the company will try to negotiate a bankruptcy payout plan with regulators. Schwartz stated that Linqto has a $60 million loan lined up from Sandton Capital Partners to fund its Chapter 11 bankruptcy, a loan it says it needs because very little cash has been generated by the business since it suspended its operations in March.