Ripple CEO Brad Garlinghouse has addressed growing concerns from investors caught in the regulatory storm surrounding Linqto.

Linqto is a private investment platform that sells access to the crypto payment firm’s equity through secondary markets.

In a July 2 post on X, Garlinghouse clarified that Ripple has never had a formal relationship with Linqto and that the company did not authorize any direct equity sales to the platform.

According to him:

“What we know from our records is Linqto owns 4.7M shares of Ripple, solely purchased on the secondary market from other Ripple shareholders (never directly from Ripple).”

Garlinghouse also noted that Ripple stopped approving Linqto-related secondary transactions in late 2024 due to growing concerns about the platform’s practices.

His comments echo earlier remarks by Ripple CTO David Schwartz, who explained that Linqto customers did not hold Ripple shares directly. Instead, they owned a portion of a legal entity, a special-purpose vehicle (SPV), that held Ripple equity.

Schwartz said:

“The way it works is that you don’t own the shares directly but you own a portion of a legal entity that owns the shares. So if you “bought” Z shares, you own X fraction of a legal entity with Y shares where X*Y=100.”

Linqto’s investigations

The controversy surrounding Linqto comes as the Securities and Exchange Commission (SEC) and the US Department of Justice (DOJ) investigate Linqto for potential securities law violations.

According to reports, former Linqto CEO William Sarris is under scrutiny for allegedly inflating Ripple share prices by over 60% and selling them without proper authorization.

The investigation also focuses on the company’s sale of shares to non-accredited investors, with pro-crypto attorney John Deaton warning that this could pose a significant regulatory challenge for Linqto.

Deaton claimed that approximately 11,500 Linqto users had bought SPV units, assuming they were purchasing actual Ripple shares. Of those, about 5,000 are non-accredited investors, heightening concerns about compliance with SEC regulations.

He wrote:

“These are not Ripple shares per se (like many people believed, assumed, or allegedly, were led to believe) but shares/units of a SPV(s) that owned the Ripple shares. I’ve been told 4-5,000 of those SPV Ripple investors are non-accredited, which makes this a regulatory compliance nightmare.”

Meanwhile, the company’s new management, which took over after a series of missteps, has acknowledged the severity of the situation. They confirmed that client accounts were frozen in February and indicated that a Chapter 11 bankruptcy filing could leave investors in a vulnerable position, as unsecured creditors.

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