Gene Zawroty, former Linqto Chief Revenue Officer, is suing the Delaware investment company and two of its executives for multiple claims, including fraud and market manipulation.
Zawroty filed the lawsuit in California’s Santa Clara County on October 7, 2024. Although the lawsuit was filed a few weeks ago, the development only recently reached public knowledge.
Notably, prominent XRP community figure Eri called the public’s attention to the case yesterday via an X post.
Lawsuit against Linqto, Bill Sarris & Joe Endoso details emerging.
👉Insider Trading/Front Running.
👉Use of unlicensed brokers.
👉Linqto advertised 750k users, when the real number was 10k & 30% were UNaccredited.
👉Unconscionably high and undisclosed mark-ups, sometimes… pic.twitter.com/gWvv9a0Xk6— 🌸Crypto Eri 🪝Carpe Diem (@sentosumosaba) November 3, 2024
Zawrotny’s Claims Against Linqto
For context, the lawsuit was filed by Zawrotny, a former executive of Linqto who claims the company wrongly sacked him for raising concerns about its violation of compliance requirements.
The plaintiff claimed that Linqto engaged in insider trading, which saw the company prioritize its gain over customer needs. Zawrotny also alleged that Linqto uses unlicensed brokers, with misleading user base claims.
Specifically, the plaintiff suggested that Linqto lied about its claim of having over 750,000 users. According to the complaint, the company allegedly has only 10,000 users, of whom only 30% are accredited.
Additionally, the complaint alleged that the investment firm marked up shares’ prices, exceeding FINRA’s recommendation of 150%. Notably, Linqto allegedly uses a unique algorithm to increase share prices with each sale.
According to the complaint, this technique created an artificial market by giving investors the notion that shares were about to sell out, thereby driving demand.
Additional Claims
Other complaints leveled against Linqto include the company’s circumvention of SEC’s rule, misleading marketing tactics, and inadequate compliance with FINRA requirements.
Zawrotny claimed that Linqto and its executives were fully aware of these concerns but ignored them. Furthermore, Zawrotny accused Linqto of making misleading promises to him, such as a competitive salary and good stock options.
However, Linqto allegedly sacked him 107 days after his recruitment. He said the investment company terminated his employment to prevent his stock from vesting and avoid addressing the compliance concerns raised.
The plaintiff characterized the termination as unjust and detrimental to his career and financial well-being. Therefore, Zawrotny seeks injunctive relief, attorney’s fees, as well as punitive, general, and special damages.
Launched in 2018, Linqto facilitates investments in private markets, with a minimum investment of $2,500. Linqto gives investors the chance to invest in the stocks of various companies. Last year, it added Ripple’s pre-IPO stock to its platform.
Furthermore, Linqto revealed plans to utilize XRP as a payment method for its tokenized private equity proof-of-concept. The company made this known a few days after U.S. Federal Judge Analisa Torres declared that XRP is not security.
Last year, Ripple CTO David Schwartz confirmed that Linqto is a legitimate investment platform. He further highlighted Linqto’s strategy, revealing how it facilitates investments in companies like PolySign. For context, Schwartz is one of PolySign’s board members.