Discover top fintech news and events!
Subscribe to FinTech Weekly's newsletter
Read by executives at JP Morgan, Coinbase, Blackrock, Klarna and more
A legal dispute is unfolding in U.S. bankruptcy court over where embattled private market platform Linqto should face its insolvency proceedings. The case, currently filed in Texas, is being challenged by shareholders who argue the matter should be handled in Delaware, where the company is incorporated and where shareholder protections under state law are considered stronger.
The conflict centers on whether Linqto’s Chapter 11 filing in the Southern District of Texas was a legitimate move or an effort to gain a more favorable legal forum. At the heart of the disagreement are allegations concerning shareholder rights, executive conduct, and regulatory oversight.
Shareholders Challenge Bankruptcy Venue in Federal Court
Sapien, a shareholder group involved in the proceedings, filed a motion in federal bankruptcy court asserting that the Texas venue constitutes improper forum selection. According to the filing, the current board acted in ways that conflict with shareholder rights under Delaware corporate law.
The group is asking the court to move the case to Delaware, where business courts routinely oversee disputes involving corporate governance. Delaware has long been considered the primary legal home for publicly held U.S. companies, and many shareholder protections stem from its well-established case law.
The motion now awaits review by U.S. Bankruptcy Judge Alfredo R. Perez in Houston.
Texas Draws Attention from Corporate Boards
Linqto’s choice of Texas aligns with a recent trend among corporations exploring alternative venues for major legal actions. Chapter 11 filings can be made in any district with a qualifying economic tie to the company, which has led to debate over the practice known as "forum shopping." Critics argue that some companies establish minimal connections to certain jurisdictions in order to secure what they perceive as more management-friendly courts.
The state has attracted attention from corporate leaders, including some who have publicly moved incorporation from Delaware to Texas following unfavorable rulings. In a high-profile example, Tesla Inc. and SpaceX, both led by Elon Musk, shifted their legal homes to Texas after a Delaware court struck down Musk’s compensation package.
Allegations Surrounding Linqto’s Business Practices
Linqto, a startup focused on private market access, has faced mounting legal and regulatory issues over its handling of customer investments. The company promoted access to equity in high-profile private firms, offering what it described as early-stage opportunities for individual investors.
However, according to statements filed in court, customers were not actual equity holders in the companies listed. Instead, the assets were held by a Linqto affiliate, and customers purchased exposure through structured arrangements that did not confer ownership or voting rights. Linqto’s bankruptcy attorney told the Texas court that the company’s 13,600 customers are considered unsecured creditors.
The platform marketed access to stakes in more than 100 private companies, with total estimated asset value exceeding $500 million. Internal investigations following a leadership change earlier this year have raised further concerns about past management decisions and customer disclosures.
SEC Investigates Accredited Investor Compliance
The U.S. Securities and Exchange Commission has launched an investigation into Linqto, examining whether the firm’s former executives adequately verified the accreditation status of its users. Under U.S. securities regulations, participation in certain private investment opportunities is limited to accredited investors with sufficient income or net worth.
Court documents indicate that the SEC is assessing whether Linqto breached these rules, which are designed to ensure retail investors are protected from high-risk private investments.
Shareholder Claims of Governance Failures
Shareholders have expressed concern over both former and current leadership. Filings from Sapien allege that the current board failed to hold an annual meeting as required under Delaware law, and that changes were made to the company’s bylaws without proper shareholder input.
The group also claims the bankruptcy planning process was carried out without adequate transparency and that internal decisions were made in a manner that excluded stakeholders from critical corporate governance procedures.
According to filings, the internal investigation led to the removal of several original executives, and the new management team has asserted that past leaders misrepresented the nature of investment opportunities available on the platform.
Restructuring Process and Future Plans
Linqto’s advisers have stated that the goal of the Chapter 11 process is to stabilize the company and establish a path for customer repayment. Plans include raising capital through the bankruptcy framework and negotiating with regulators on a repayment structure before submitting it for creditor approval.
The timeline and terms of any payout plan have not been finalized. Customers and creditors will eventually vote on the proposal once it is filed and accepted for review by the court.
A Test Case for Venue Selection and Retail Investment Risk
The Linqto case illustrates several overlapping issues facing today’s fintech sector, including regulatory compliance, governance accountability, and venue selection in bankruptcy. It also underscores the risks associated with new digital investment platforms that promise access to markets historically limited to institutional players.
At a time when fintech services continue to expand across jurisdictions, legal clarity and investor safeguards remain central to maintaining public trust. The outcome of this case may influence how future fintech-related bankruptcies are structured, particularly where shareholder rights and regulatory enforcement intersect.
