Shareholders of Private Market Startup Vow to Fight Bankruptcy

Mint

09-07-2025

Shareholders of collapsed fintech startup Linqto vowed to fight an effort by its new management to reorganize the troubled company in bankruptcy.
Managers who took over in recent months put Linqto under court protection in Houston this week, claiming former executives mismanaged the firm's business for years by misleading customers into believing they owned shares in 111, privately-held companies worth more than $500 million.
Shareholder Sapien Group, an Australia-based investment firm, said it has the backing of 52% of shareholders for its campaign to challenge current managers in bankruptcy. Sapien has hired bankruptcy lawyers for advice on whether to try to dismiss the Chapter 11 petition, or take other action, according to the letter.
'Our objectives remain the same: preserving the value of Linqto as a going concern and operating business; and protecting the value of the shareholders' investments,' Sapien said in the letter. It was unclear which shareholders are part of the Sapien-led effort.
A representative of Linqto declined to comment on the letter.
Linqto told its 13,600 customers that they could buy stakes in private companies before the firms went public, something that's typically available only to big institutions, company bankruptcy attorney Samuel A. Schwartz told the judge overseeing the insolvency case on Tuesday. That turned out to be wrong, Schwartz said.
The 'securities couldn't be transferred just directly to customers, that would be a violation of securities law,' he said, referring to the shares customers thought they were acquiring. 'Also, the securities themselves have contractual transfer limitations.'
The startup, which started offering private investments in 2020, was part of a wave of financial firms that claimed to make private markets more accessible. Its offerings — which included crypto startup Ripple and AI company CoreWeave — drew in individuals attracted to the allure of private markets.
The US Securities and Exchange Commission is investigating Linqto and whether its former managers failed to verify if some of its customers were accredited investors with sufficient financial backing to invest through the company, according to court documents.
A Linqto affiliate is the actual owner of the 111 securities, Schwartz said. The company's customers are unsecured creditors, he said.
Linqto's advisers plan to use the bankruptcy process to raise money to repay customers and other creditors, he said. The company will try to negotiate a bankruptcy payout plan with regulators before presenting a detailed proposal to creditors for a vote, Schwartz said.
'We think we have significant resources to make distributions to customers,' he told US Bankruptcy Judge Alfredo R. Perez.
The company in early 2024 began searching for a new CEO to replace company founder Bill Sarris. After a months-long search, it hired Francis Daniel Siciliano as its new CEO, who learned just before he started the new job that Linqto faced probes by the SEC and the Financial Industry Regulatory Authority.
Siciliano began an internal investigation that eventually forced out many original executives, according to court records.
Linqto has lined up a $60 million loan from Sandton Capital Partners to fund its Chapter 11 bankruptcy. The company said it needs the loan because it's been generating relatively little cash since it suspended its operations in March. To stay afloat, the company is selling securities 'to sophisticated purchasers' that are in compliance with applicable state and federal laws, Stein said.
The case is Linqto Texas, LLC, 25-90186, US Bankruptcy Court, Southern District of Texas, Houston.
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