News Summary
Shareholders of Linqto Inc. are demanding the transfer of the company’s bankruptcy case from Texas to Delaware. Their legal representation argues that Delaware offers better protection for shareholder rights. This comes amid allegations of corporate mismanagement by new CEO Dan Siciliano and suspicions of improper forum shopping as the company files for bankruptcy under Linqto Texas. Shareholder concerns also include issues of transparency regarding management decisions and legal inquiries from the SEC.
Texas – Shareholders of Linqto Inc., a now-collapsed fintech startup, have officially requested that a Texas federal judge transfer the company’s bankruptcy case from Texas to Delaware. The investment firm Sapien Group, representing the shareholders, argues that Delaware law would offer them better legal protections, particularly in light of allegations concerning actions taken by the new management under CEO Dan Siciliano.
The central claim in the shareholders’ filing is that since Siciliano took over from founder Bill Sarris, the new management has engaged in practices that undermine shareholder rights. An important detail in this case is that Linqto created a corporate shell named Linqto Texas to facilitate the bankruptcy filing in Texas, although the parent company is incorporated in Delaware. The current management’s actions are alleged to be in violation of Delaware law surrounding shareholder rights.
Shareholder advocates view the existing bankruptcy filing as a case of “improper forum shopping,” a maneuver in which companies seek out legal venues perceived as more favorable to their position. In defense of the Texas filing, Linqto maintains that Texas courts have a strong track record in dealing with bankruptcy cases and emphasize their aim to prioritize customer claim value.
The legal framework governing such cases permits companies to file for bankruptcy in any U.S. federal court that has some economic connection to the jurisdiction. Critics, however, argue that this provision enables companies to seek out friendly judges, pointing out that establishing a connection can be as straightforward as opening a bank account within the state.
The case transfer motion requires approval from Houston-based federal judge Alfredo R. Perez. Shareholders have raised serious concerns regarding former executives allegedly misleading customers into believing they owned shares in 111 privately held companies valued collectively at over $500 million. Linqto reportedly marketed investment opportunities in private firms traditionally reserved for larger institutional investors to its 13,600 customers.
An internal investigation led by Siciliano resulted in the ousting of several key executives and raised significant questions about the management practices of the firm. Reports state that the company has failed to hold its legally mandated annual shareholder meeting under Delaware law. Additionally, claims have emerged that the new board of directors improperly altered company bylaws while preparing for bankruptcy filings without transparency.
Adding further scrutiny to Linqto’s situation, the Securities and Exchange Commission (SEC) is currently investigating the firm for potential violations related to the accreditation of customers for their investment in the company. Linqto aims to utilize the bankruptcy process as a means to raise funds necessary to repay customers and other creditors. The bankruptcy case is recorded under Linqto Texas, LLC, with the case number 25-90186 in the U.S. Bankruptcy Court for the Southern District of Texas.
Prior to the formal bankruptcy filing, speculation about Linqto’s financial difficulties was rampant. Reports indicated internal findings uncovering alarming business practices that occurred before Siciliano took control of the company. Linqto’s prior associations have also come under scrutiny, as recent clarifications from Ripple’s CEO clarified that while Linqto holds 4.7 million shares in Ripple, there is no ongoing business relationship between the two entities.
Additionally, Linqto has faced allegations of violating securities laws and mismanagement from former executives, with legal actions being initiated by previous staff members. Compounding the firm’s troubles, Linqto has ceased operations of its trading platform, effectively halting any revenue generation since March 2023.
As legal proceedings continue, the outcome may significantly affect shareholders currently navigating the tumultuous aftermath of the firm’s collapse and ongoing bankruptcy process.
Deeper Dive: News & Info About This Topic
- Live Mint
- Wikipedia: Bankruptcy
- Wall Street Journal
- Google Search: Linqto bankruptcy
- Reuters
- Encyclopedia Britannica: Bankruptcy
- Business Wire
- Cointelegraph
Author: STAFF HERE COLLEGE WRITER
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