Ripple CEO Distances Firm From Linqto Amid Federal Probe

Ripple Labs CEO is distancing the company from Linqto, a private investment platform now under federal investigation and possibly heading for bankruptcy. 

Ripple Cuts Ties as Linqto Faces Federal Scrutiny

The story begins after a report by WSJ sheds light on the investigations against Linqto. The company had promoted itself as a venue for investors to access private company shares, allowing investors to capitalize on these securities before they went public.

Ripple Labs—the cryptocurrency firm that is responsible for one of the top altcoins ($XRP), specializes in cross-border payments and is responsible for one of the top altcoins—quickly became Linqto’s “poster child”. 

For years, rumours have been circulating around the industry that Ripple could go public. And getting a hold of Ripple Labs’ shares before IPO could mean big returns.

But now, that promise is under serious scrutiny. According to a recent Wall Street Journal investigation, Linqto is being investigated by both the SEC and the Department of Justice for allegedly misleading investors, selling shares without proper authorization, and marking up Ripple shares by over 60% without disclosure.

Questions Mount Over Private Share Sales and Investor Protections

According to securities laws in the U.S., private companies can only sell unregistered securities after meeting strict criteria, and most importantly, these sales are only allowed to be made to accredited investors. These are individuals or entities that meet specific financial thresholds. The idea behind it is that the SEC allows a select group of investors, on the argument that they are financially sophisticated enough to take on higher-risk investments without needing the same protections as the general public.

The investigations detail that the former CEO of Linqto, Bill Sarris, aggressively marketed Ripple shares to thousands of users, many of whom may not qualify as accredited investors. Internal emails reviewed by the WSJ show that Sarris encouraged staff to use every possible channel, including influencers and ads, to push Ripple equity. In one campaign dubbed “Spike Day,” employees were urged to drive sales regardless of investor eligibility.

Ripple CEO Speaks Up

Now, Ripple Labs Chief Executive Officer Brad Garlinghouse went on Twitter to clarify the company’s position and distance Ripple from the growing controversy. In this post, Garlinghouse clarified that while Linqto owns 4.7 million Ripple shares, all of these assets were acquired on the secondary market.

“Apart from Linqto being a shareholder, Ripple has never had a business relationship with Linqto,” he wrote, “nor have they participated in our financing rounds.”

The Ripple CEO also clarified that the crypto firm has barred Linqto from acquiring more shares on the secondary market in late 2024, due to growing concerns about how the platform was operating.

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