Linqto, a private equity investment platform known for offering access to pre-IPO companies, has filed for Chapter 11 bankruptcy in the U.S., triggering shockwaves across the crypto and private equity space. The company, which owns 4.7 million secondary shares of Ripple, submitted the bankruptcy filing in the Southern District of Texas on Monday.

Despite its Ripple holdings, Ripple CEO Brad Garlinghouse emphasized there is no business relationship between the two firms, stating that Ripple has never worked with Linqto nor involved them in any funding rounds.

Linqto’s troubles escalated following a Wall Street Journal report suggesting the firm may have sold securities to ineligible investors and misled customers into believing they owned shares they actually didn’t. An internal memo reportedly revealed troubling practices, prompting federal investigations. The company’s new CEO, Dan Siciliano, described past actions as deeply concerning, far beyond minor compliance errors.

Court filings revealed that Linqto’s securities vehicle, Liquidshares, holds an estimated $500 million in private company shares, including Ripple. However, Ripple’s secondary shares have been largely frozen amid a $700 million tender offer priced at $175 per share.

Adding to the turmoil, Linqto allegedly attempted to sell Ripple shares to its users with a 60% markup, a direct violation of SEC rules limiting markups to 10%. Former CRO Gene Zawrotny has also filed a lawsuit against Linqto’s ex-executives, citing severe compliance breaches and retaliation.

Linqto shut down its platform in March, ending revenue operations. It now faces SEC scrutiny, multiple lawsuits, and a restructuring led by bankruptcy experts. Ripple officially distanced itself from Linqto in late 2024 and has not approved any share purchases since.