Linqto Inc., a failed fintech startup, was granted court permission to try to sell valuable stakes in hard-to-acquire private companies to fund its bankruptcy case.
Linqto did not specify which securities it would try to liquidate, but stated that they would be from a portfolio worth more than $500 million.It had purchased the stakes for itself and its customers before the online investment platform shut down and declared bankruptcy while under investigation by federal regulators.
Key Highlights
- Linqto files for Chapter 11, holding private firm stakes worth over $500 million amid bankruptcy.
- Court permits sale of hard-to-acquire private shares to fund restructuring amid SEC and FINRA probes.
The firm's demise highlights the risks that retail investors face when investing in illiquid and difficult-to-value assets. It comes just weeks after President Trump signed an executive order making it easier for 401(k) participants to invest in private markets, which have made fortunes for some while resulting in massive losses for others.
Linqto, which began offering private investments in 2020, was one of a number of financial firms claiming to make private markets more accessible. Its offerings, which included stakes in cryptocurrency startup Ripple and AI firm CoreWeave Inc., drew in investors drawn to the allure of private markets.
The US Securities and Exchange Commission is looking into Linqto and whether former executives failed to ensure that some of its customers were accredited investors with sufficient financial backing to invest through the company.
Linqto had informed its 13,600 customers that they could purchase stakes in some of the most promising private companies before they went public, which is typically only available to large institutions. That turned out to be incorrect, Linqto bankruptcy attorney Samuel A. Schwartz stated in court last month.
The securities could not be transferred directly to customers due to a variety of technical reasons, including regulatory limitations, according to the company. Linqto's court papers list a $399 million stake in Ripple, $35 million in Space Exploration Technologies Corp. equity, and $106.6 million in publicly traded fintech Circle Internet Group Inc. shares.
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Linqto's new managers will avoid an expensive court battle over who owns the securities, which is a complicated question tied to federal rules for accredited investors, Schwartz said at a court hearing in Houston on Tuesday.
According to court documents, no sale will be final until customers have had the opportunity to claim ownership of any of the securities. Linqto Texas, LLC, 25-90186, United States Bankruptcy Court, Southern District of Texas.
