John Deaton vows to protect Linqto investors in bankruptcy, pushing for fair returns on Ripple and Circle shares, prioritizing 11,500 SPV holders.
Amid the Linqto bankruptcy proceedings, XRP counsel John Deaton has recently expressed a positive outlook. As per Deaton, customers may be prioritized over equity shareholders, which could result in a complete recovery or substantial returns.
Customers are the primary concern during the Linqto bankruptcy
In a recent X post, XRP lawyer John Deaton provided insight into the Linqto bankruptcy proceedings, providing clients with a glimmer of hope. Despite the company’s financial difficulties, John Deaton maintains optimism regarding Linqto’s consumers, emphasizing their importance. He declared, “The great news is that no creditors are in line before Linqto customers.”
Deaton expressed his dedication to safeguarding consumers from losses in the following manner by writing,
Some people have their life savings on the platform and I will do whatever I can to make sure they don’t lose it. In fact, they SHOULD get MORE than the value of their initial investments.
In addition, Deaton stated that Linqto equity shareholders will be prioritized over Linqto customers, which include 11,500 Ripple SPV unit holders, in court. Furthermore, the shares of invested companies, including Ripple, SpaceX, and Circle, are considered. He also stated that an exception will be made for the 3% of Ripple shares that were sold without customer knowledge; however, the funds from that transaction are still accessible.
Additionally, Deaton disclosed that six individuals claimed to have substantial investments in the platform, including three former employees and three influencers. They asserted that they were unaware of the “shenanigans” and malpractices within the platform that contravened securities laws. Additionally, he stated,
The good news is EVERYTHING will be public and everyone will get to know who invested what and who knew what. Internal emails, emails to third-parties, including related to advertising and marketing can be part of the process.
What transpired?
It is important to note that Linqto, an investment platform headquartered in San Francisco, is on the verge of bankruptcy due to allegations of illegal business practices and securities law violations committed by its former CEO, William Sarris. The SEC and the US DOJ are investigating the company, which facilitated the acquisition of shares in privately held crypto companies such as Ripple and Circle through pre-IPO shares.
Allegedly, Sarris has profited $2 million by selling Ripple shares at a 60% markup without informing customers. Linqto acquired 4.7 million Ripple shares from existing shareholders in the secondary market, not directly from Ripple, as Ripple CEO Brad Garlinghouse clarified. He emphasized that Ripple has no formal commercial relationship with Linqto and has not sold any shares to the platform. CTO David Schwartz also clarified the situation: “You do not directly own the shares; rather, you own a portion of a legal entity that owns the shares.”
Investors are apprehensive about Linqto’s refund strategy
John Deaton had previously expressed concern regarding Linqto’s controversial refund strategy. He cautioned investors that they could miss out on substantial profits.
Linqto’s proposal to refund only the initial investment amounts has created significant outrage among investors. Investors who have invested in assets such as Ripple and Circle are particularly concerned, as these shares have experienced significant value increases. Deaton emphasized his personal experience, in which a $30,000 investment in Circle increased to $157,000, illustrating the potential losses investors may encounter. This situation has prompted urgent inquiries regarding the rights and protections of investors in the cryptocurrency sector.
