Houston Shareholders Push for Linqto Bankruptcy Case Transfer

News Summary

Shareholders of Linqto Inc. are demanding the transfer of the company’s bankruptcy case from Texas to Delaware. Their legal representation argues that Delaware offers better protection for shareholder rights. This comes amid allegations of corporate mismanagement by new CEO Dan Siciliano and suspicions of improper forum shopping as the company files for bankruptcy under Linqto Texas. Shareholder concerns also include issues of transparency regarding management decisions and legal inquiries from the SEC.

Houston Shareholders in Linqto Inc. Push for Bankruptcy Case Move to Delaware

In a turn of events that has left many scratching their heads, shareholders of Linqto Inc., a fintech startup that has recently hit a financial wall, are demanding that a federal judge in Texas transfer the company’s bankruptcy case to Delaware. This intriguing push comes amid a cloud of controversy surrounding the company’s new management and its strategic decisions under CEO Dan Siciliano, who took over from the founder, Bill Sarris.

A Texas Twist

So why the transfer? The investment firm Sapien Group, which is representing the shareholders, argues that they would be better protected under Delaware law. This assertion rests on the idea that Delaware offers a more favorable legal environment for handling corporate matters, particularly when it comes to shareholder rights. The shareholders are feeling the heat, particularly since they claim that the recent management decisions have been unkind and even detrimental to their interests.

Interestingly enough, Linqto has created a corporate shell called Linqto Texas to file for bankruptcy in Texas rather than in Delaware, where the parent company is officially incorporated. The shareholders are crying foul, alleging that these actions potentially violate Delaware laws governing shareholder rights and could be indicative of improper forum shopping. In simple terms, they think the company is trying to find a friendly judge to get a better outcome.

What’s the Big Deal?

Now, the legal framework in the United States allows companies the flexibility to file for bankruptcy in any federal court where they can demonstrate a connection to the area. While at first glance, this seems totally reasonable, critics argue that it opens the door for companies to play a game of “choose your judge.” For instance, all it takes to establish a connection to a state can sometimes be as simple as opening a bank account.

For now, the motion to transfer the case will need the green light from Houston-based federal judge Alfredo R. Perez. Meanwhile, shareholders are especially alarmed about the claims that former executives misled customers into believing they owned shares in private companies worth over a staggering $500 million. Not only is that a big number, but it also raises significant questions regarding the integrity of Linqto’s operations.

Concerns About Management

Recently, Linqto’s management has been under intense scrutiny following an internal investigation led by Siciliano. Several original executives were ousted, and doubts about how the company has been run are swirling. For instance, shareholders are highlighting that Linqto has failed to hold its annual shareholder meeting as required by Delaware law. On top of that, a new board of directors has allegedly made unauthorized changes to the company’s bylaws and has conducted bankruptcy preparations without any transparency.

The drama doesn’t end there. The Securities and Exchange Commission (SEC) is also looking into Linqto for possible violations, specifically regarding the accreditation of its customers for investment purposes. As the company charts its path through bankruptcy, it hopes to use this opportunity to raise funds to repay customers and creditors alike. As of now, the case is filed under Linqto Texas, LLC, in the U.S. Bankruptcy Court, Southern District of Texas, with the case number 25-90186.

Operational Halt

Now here’s the kicker: Linqto has ceased all platform operations since March 2023, which means there hasn’t been any money coming in since then. News reports had already hinted at financial troubles before the formal bankruptcy filing became public. Internal findings from the company paint a worrisome picture regarding its business practices prior to Siciliano taking charge.

Lastly, while Linqto does hold 4.7 million shares in Ripple, it does not maintain any ongoing business relationship with them. Legal troubles from past executives continue to linger as shareholders seek resolution amidst these challenging times.

Deeper Dive: News & Info About This Topic

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