Linqto Files Chapter 11 Amid SEC Investigation Over Ripple Shares

Linqto, a private investment platform, has filed for Chapter 11 bankruptcy in Texas. This move comes amidst an ongoing investigation by the U.S. Securities and Exchange Commission (SEC) into its securities practices, particularly concerning the sale of Ripple shares. Linqto held 4.7 million Ripple shares, which were acquired on the secondary market. The company attempted to sell these shares at markups, reportedly violating SEC guidelines. This regulatory scrutiny has intensified the company's troubles, leading to its bankruptcy filing.

The bankruptcy filing highlights the risks associated with retail access to pre-IPO shares and the potential impact on market trust. Linqto's situation could signal a shift in the pre-IPO equity markets, particularly for retail investment platforms. The company's former CEO, Will Sarris, oversaw the operations that led to the regulatory challenges. The restructuring process will be led by Jeffrey Stein, who aims to settle liabilities with regulators. Stein stated, "The company aims to negotiate with the SEC and other regulators to settle outstanding liabilities and litigations in a way that treats everyone equitably and fairly."

Ripple CEO Brad Garlinghouse clarified that there is no business relationship between Ripple and Linqto, emphasizing that Ripple did not directly sell shares to Linqto. Despite the focus on Ripple's shares, major cryptocurrencies like XRP remain unaffected, with no significant on-chain impacts reported. However, investors express concerns about the authenticity and security of their holdings.

Historical patterns suggest that intensified regulatory efforts are common in similar situations, particularly emphasizing compliance and the protection of unqualified investors. Such issues were prevalent during the ICO regulatory actions and OTC desk failures in past years, reiterating the complexity of retail access to emerging fintech offerings. The outcome of Linqto's bankruptcy process will be closely watched by industry observers, as it could set a precedent for how similar platforms handle regulatory scrutiny and financial distress.