The ongoing legal and regulatory scrutiny surrounding Ripple Labs has taken a new turn with revelations about third-party platform Linqto’s holdings of private Ripple stock. Ripple CEO Brad Garlinghouse has stepped forward to clarify the company's position, confirming that Linqto holds 4.7 million shares of Ripple through secondary market transactions—while firmly denying any direct involvement or sale from Ripple itself.
This disclosure comes amid growing concerns over investor rights, securities compliance, and the broader implications for private market investing platforms.
Understanding the Linqto Connection
Linqto, a private equity investment platform, has come under fire for allegedly violating U.S. securities laws by enabling unaccredited investors to purchase stakes in high-profile private companies—including Ripple—before they go public. According to recent reports, Linqto acquired Ripple shares on the secondary market and resold fractional interests to retail investors.
However, a critical detail often missed by buyers: investors do not directly own Ripple stock. Instead, they hold units in a Special Purpose Vehicle (SPV) that collectively owns the underlying shares. This structure raises complex legal and transparency issues, particularly when it involves non-accredited investors who may lack the financial sophistication or resources to assess such risks.
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Regulatory Red Flags and Investor Exposure
Approximately 5,000 Ripple-related investors through Linqto are reportedly non-accredited—a classification that triggers heightened regulatory scrutiny under SEC rules. These investors typically do not meet income or net worth thresholds required for participation in private placements, making their inclusion a potential violation of federal securities regulations.
Former Congressman John Deaton highlighted this issue, calling the situation a “regulatory nightmare” due to the scale and complexity of unregistered offerings involving major fintech and tech firms like Ripple, Circle, Kraken, Anthropic AI, and even SpaceX.
Despite these concerns, Deaton offered some reassurance:
“The good news is that all the shares investors bought in companies like Circle, Ripple, Uphold, Kraken, and SpaceX have been delivered and are accounted for. The only caveat is that 3% of Ripple’s shares were sold without investor knowledge—but the proceeds remain in escrow.”
This acknowledgment underscores both accountability and vulnerability within alternative investment ecosystems. While assets appear secure, the lack of transparency around certain transactions threatens trust and long-term legitimacy.
Garlinghouse: No Direct Ties to Linqto
In a clear effort to distance Ripple from Linqto’s operations, CEO Brad Garlinghouse emphasized that Ripple never engaged in direct sales with the platform.
“According to our records, the 4.7 million shares of Ripple stock held by Linqto were acquired entirely from other shareholders on the secondary market—not from Ripple,” Garlinghouse stated.
He also noted that these shares, originally purchased at significantly lower valuations, have appreciated substantially—reflecting Ripple’s growth trajectory despite ongoing litigation with the SEC. However, due to increasing concerns about misuse and compliance breaches, Linqto was barred from participating in Ripple’s secondary market activities as of 2024.
This move signals Ripple’s intent to protect shareholder integrity and maintain control over its private capital ecosystem.
XRP vs. Private Equity: Clarifying the Confusion
A common misconception among retail participants is conflating XRP, Ripple’s native digital asset traded on crypto exchanges, with private equity shares in Ripple Labs Inc., which are not publicly listed.
- XRP (Cryptocurrency): A decentralized digital asset used for fast cross-border payments; traded openly on platforms like OKX.
- Ripple Private Stock: Equity ownership in the corporate entity; restricted to accredited investors and subject to securities regulations.
Data from Hiive shows that Ripple’s private shares have surged 320% year-over-year, currently trading at $91 per share—highlighting strong institutional demand ahead of a potential IPO.
Meanwhile, XRP continues to operate independently within the crypto economy, unaffected by private equity transactions—though market sentiment can be influenced by corporate developments.
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FAQs: Addressing Key Investor Questions
Q: Does owning Linqto units mean I own Ripple stock directly?
A: No. Investors hold units in an SPV (Special Purpose Vehicle), which owns the actual shares. You do not have direct shareholder rights in Ripple.
Q: Are Linqto investors at risk of losing their investment?
A: Based on current disclosures, the underlying shares are accounted for. However, legal uncertainties remain due to regulatory violations involving unaccredited investors.
Q: Can non-accredited investors legally buy private company shares?
A: Generally, no—unless through specific exemptions or registered platforms. Selling unregistered securities to non-accredited investors may violate SEC rules.
Q: What happened to the 3% of Ripple shares sold without investor consent?
A: Former Congressman John Deaton confirmed the sale occurred without disclosure but stated the proceeds are still held in escrow, suggesting potential recovery options.
Q: Is Ripple involved in Linqto’s business model?
A: Ripple denies any partnership or direct sales with Linqto. All shares were obtained via secondary market transfers between private shareholders.
Q: How does this affect Ripple’s IPO prospects?
A: While complications exist, Ripple continues preparing for a future public listing. Resolving third-party distribution issues will be key to ensuring a clean path to market.
Looking Ahead: Compliance, Clarity, and Confidence
As private market investing becomes more accessible through fintech platforms, ensuring regulatory compliance and investor protection must remain top priorities. The Linqto case illustrates both the opportunities and risks of democratizing access to pre-IPO equity.
For Ripple, maintaining transparency and distancing itself from unauthorized distribution channels reinforces its commitment to合规 growth—even amid intense scrutiny from the SEC and Department of Justice.
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Core Keywords Integrated:
- Ripple CEO
- Linqto
- Private stock
- Secondary market
- Non-accredited investors
- SEC regulations
- Investor rights
- XRP vs equity
With over 5,000 individuals impacted and multiple high-profile companies involved, this case could set important precedents for how private equity is structured, sold, and governed in the digital age. As developments unfold, stakeholders should stay informed, vigilant, and focused on platforms that prioritize security, legality, and long-term value creation.