Ripple CEO Brad Garlinghouse recently addressed the ongoing legal dispute involving Linqto, the Securities and Exchange Commission (SEC), and the Department of Justice (DoJ) regarding Ripple’s private shares. According to a report by the Wall Street Journal, Linqto allegedly violated securities laws by allowing retail investors to purchase private shares in startups like Ripple before they go public.
The report suggested that Linqto acquired Ripple’s private shares from the secondary market and sold them to non-accredited investors, including individuals from sanctioned countries, at inflated prices. Furthermore, some investors were reportedly unaware that they did not directly own Ripple’s shares but instead held shares of a Specialized Purpose Vehicle (SPV) that owned the shares on their behalf. Approximately 5,000 of these SPV Ripple investors are said to be non-accredited, raising concerns about regulatory compliance.
In response to these allegations, Ripple’s CEO clarified the company’s relationship with Linqto, stating that Linqto owns 4.7 million Ripple shares purchased solely from other Ripple shareholders on the secondary market and not directly from Ripple. Garlinghouse also noted that the value of these shares had significantly appreciated, although Linqto was barred from trading Ripple shares on secondary markets in 2024 due to mounting skepticism.
It is important to distinguish between Ripple’s private shares and the XRP token, as they are separate entities. The value of Ripple’s private shares has surged by 320% year-on-year, currently trading at $91 according to Hiive data. Other companies like Circle, Kraken, Anthropic AI, and SpaceX also had shares on the Linqto platform, with assurances from John Deaton that the shares are secure, despite 3% of Ripple shares being sold without investors’ knowledge.
As investors express concerns about the potential impact on their investments, Deaton reassured them that they would be prioritized in bankruptcy repayments if necessary. The outcome of the legal proceedings and the resolution for affected investors remain uncertain, highlighting the need for transparency and accountability in the private share trading market.
As this situation continues to unfold, stakeholders will be closely monitoring developments to ensure that investor interests are protected and that regulatory compliance is upheld. Stay tuned for updates on this evolving story.