Linqto, a San Jose-based fintech startup that filed for Chapter 11 bankruptcy, has agreed to a deal to repay customers.
Linqto pitched retail investors the chance to buy into coveted firms such as Ripple Labs and Elon Musk's SpaceX ahead of IPOs.
But court filings revealed that Linqto structured the investments through special purpose vehicles (SPVs) owned by the company itself, not by individual customers. That meant users never held the shares they thought they had purchased.
Related: Linqto, platform offering Ripple and Circle shares, files for Chapter 11 bankruptcy
By July 2025, Linqto filed for Chapter 11 bankruptcy , reporting a portfolio worth more than $500 million in private-company stakes. Federal regulators were already investigating the firm's business model.
Linqto's proposed repayment plan
During a Sept. 16 bankruptcy hearing, attorney Samuel A. Schwartzoutlined a dual repayment plan designed to return value without violating U.S. securities law:
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A closed-end fund, holding Linqto's portfolio, tradable like a public stock for added liquidity.
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A trust, holding the same assets but allowing only periodic redemptions.
Ripple lawyer: "This is a fraud case"
Ripple attorney John E. Deaton, representing more than 3,600 Linqto customers, called the deal the best option available under the circumstances:
"The Creditors Committee voted for the deal and I agree under the circumstances – it is the best option we have because if we spend 2 years in bankruptcy it will cost $150M which will come out of customer money… But make no mistake about it: we wouldn't be in this position if Linqto had not committed fraud," Deaton said on X.
Creditors' attorney Kenneth Auletwas more blunt, warning that directly distributing Ripple shares would effectively make the company public overnight:
"This is a fraud case. What Linqto promised and what it delivered are very, very different," Aulet told the court.
Next steps
The settlement requires approval from U.S. Bankruptcy Judge Alfredo Perez, who has scheduled an Oct. 3 hearing in Houston. The case, Linqto Texas LLC, 25-90186, is being heard in the Southern District of Texas.
If approved, the plan would become central to Linqto's bankruptcy exit and avoid years of costly litigation.
This story was originally reported by TheStreet on Sep 17, 2025, where it first appeared in the Bankruptcy News & Analysis section. Add TheStreet as a Preferred Source by clicking here.
