Discover top fintech news and events!
Subscribe to FinTech Weekly's newsletter
Read by executives at JP Morgan, Coinbase, Blackrock, Klarna and more
Linqto, a U.S.-based private investment platform known for offering pre-IPO equity to retail investors, filed for Chapter 11 bankruptcy on July 8 in the U.S. District Court for the Southern District of Texas. The filing follows months of regulatory scrutiny, internal investigations, and allegations of securities law violations tied to its operations and investment structures.
The company, which allowed individual investors to gain exposure to private firms through series limited liability companies (LLCs), listed over $500 million in securities held through its investment vehicle, LiquidShares. Among those assets are an estimated 4.7 million shares of Ripple, the blockchain firm currently involved in its own legal battle with U.S. regulators.
Platform Collapse and Shutdown Timeline
Linqto shut down its platform on March 13, ceasing all customer-facing operations and revenue generation. The move followed mounting operational and legal pressure after reports surfaced regarding irregularities in the company’s practices.
Court filings and internal reviews have since revealed that Linqto failed to ensure title transfer of securities to individual customers and potentially misled retail investors regarding their ownership rights. Investors using the platform believed they were purchasing direct equity in high-profile private companies. Instead, assets were held in pooled vehicles managed by Linqto, leaving users exposed to counterparty risk.
Regulatory and Legal Investigations Intensify
Linqto is currently under investigation by the Securities and Exchange Commission (SEC) and the Department of Justice. The Financial Industry Regulatory Authority (FINRA) concluded a review of the company’s affiliated broker-dealer, Linqto Capital, in late 2024. Regulatory scrutiny centers on whether Linqto sold securities to ineligible investors and violated pricing restrictions mandated by federal securities law.
Reports allege that the company offered shares in private firms, including Ripple, to its users at prices well above cost. In one case, Ripple shares were reportedly sold at premiums exceeding 60% over the acquisition price—raising concerns about fair disclosure and investor protections.
The firm’s investment structure relied on series LLCs, which aggregated investor funds and purchased shares in privately held companies. These vehicles are now under examination for potential structuring violations, including failure to secure issuer approval for share transfers.
Ripple's Role and Disassociation Efforts
Ripple, one of the highest-profile companies linked to Linqto through investment activity, has publicly disclaimed any business relationship with the platform. Although Linqto remains a shareholder in Ripple, holding shares via its LiquidShares entity, Ripple has stated that it was not involved in Linqto’s funding rounds and did not partner with the company in any operational capacity.
Despite the disassociation, Ripple’s name has remained prominently mentioned in legal filings and bankruptcy records due to its significance within Linqto’s asset portfolio.
Broader Implications for Secondary Equity Platforms
The Linqto case raises broader concerns about investor protections in the emerging market for private secondary equity platforms. While such platforms claim to democratize access to early-stage equity, the regulatory framework remains fragmented. Questions about custody, transfer rights, pricing transparency, and compliance remain unresolved in many jurisdictions.
Linqto’s use of intermediated vehicles and opaque ownership structures is now being cited as a cautionary example of what can go wrong in the absence of clear oversight. The company’s downfall also highlights how retail-facing fintech firms operating outside traditional financial channels may face heightened legal exposure when managing securities tied to unlisted firms.
Uncertain Recovery for Platform Users
Investors using Linqto’s platform included more than 11,000 individual customers who purchased interests in private companies through series LLCs. These customers are now navigating bankruptcy proceedings with limited clarity on how their claims will be treated.
Many users had believed they held direct stakes in pre-IPO firms, including technology and crypto-related companies. The restructuring process will now determine whether those interests translate into any recoverable value, or if claims will be subordinated under broader creditor settlement plans.
The combination of regulatory action, bankruptcy court oversight, and internal investigations has put Linqto’s future—and the investment outcomes of its customer base—into the hands of legal and financial administrators.
Outlook
Linqto’s collapse underscores the risks associated with lightly regulated investment channels offering access to private equity. The case is now being closely watched by market observers, policymakers, and fintech industry participants as a potential test case for how U.S. authorities may enforce rules on platforms facilitating secondary investment in private firms.
As the bankruptcy process unfolds, it remains to be seen how creditors, regulators, and counterparties—including those involved in Ripple-linked holdings—will resolve competing claims over assets that were marketed as accessible to everyday investors but ultimately remained out of their legal control.
