- Ripple denies direct share sales to Linqto amid DOJ probe and bankruptcy concerns.
- Linqto investors hold fractional shares via SPVs, limiting Ripple’s regulatory risk.
- XRP price dips reflect market unease from Linqto controversy and legal uncertainty.
Ripple CEO Brad Garlinghouse has responded to the growing criticism around his company being involved with an investment platform, Linqto, which is currently under investigation by the U.S. Department of Justice (DOJ) and faces the threat of bankruptcy. In response to questions raised by investors, Garlinghouse clarified that Ripple has never sold pre-IPO stocks directly to Linqto.
According to him, Linqto purchased 4.7 million Ripple shares on the secondary market of privately held, rather than publicly traded, Ripple shares. This exposition follows a surge in questioning regarding business operations and investor allegations regarding the productivity of Linqto.
Garlinghouse has also clarified that Ripple does not maintain a business relationship with Linqto and has never approached the business in fundraising activities. Ripple CTO David Schwartz chimed in, clarifying that Linqto investors do not directly own a stake in Ripple, but rather fractional ownership of a special-purpose vehicle (SPV) that includes Ripple equity.
Ripple Distances Itself from Regulatory Risks
Investor concerns escalated in November 2024 after Gene Zawroty, the former Chief Revenue Officer at Linqto, brought a lawsuit against the company, accusing it of fraud, insider trading, and market manipulation. Such legal issues, in conjunction with current federal investigations, further augment the uncertainty surrounding Linqto’s business.
In response, Ripple also allegedly denied Linqto the permission to buy more shares through secondary markets towards the end of 2024. This action by the company to prevent additional acquisitions was to ensure that the pre-IPO equity portfolio of Ripple is not packaged into various high-risk products by third parties.
Former Senate candidate John Deaton added a comment, confirming that the pre-IPO shares Ripple sold were not directly sold to Linqto or end-users. He clarified that the SPVs are the owners, putting Ripple out of reach of liability or regulatory complexities.
Linqto, which handles fractional ownership in pre-IPO companies, such as Ripple, was once popular due to its ability to afford retail consumers access to high-demand shares. Nevertheless, questions about its activities started to appear on social spaces such as X among certain investors, which is why it drew more attention from regulators.
XRP Pulls Back Amid Market Pressure
Market anxiety related to the controversy manifests in the actions of XRP. Since its highest value of $2.32 on June 30, XRP has dropped to $2.18. The token declined by 2.85% on July 1 and another 0.6% in the past hour, and an early July correction has been made.
Although XRP has increased by more than 6% since June 23, it has lost much at the same time. It indicates a 24-hour loss of 1.1% and a weekly loss of 0.9%. The continued market reaction implies that investor sentiment is responsive to legal activities and Ripple-associated ambiguity.
