Linqto, the bankrupt San Jose-based fintech that once lured thousands of investors with promises of pre-IPO access to tech startups, is intensifying its legal confrontation with Forge Global Holdings and its parent company, Charles Schwab. The dispute centers on Forge's refusal to honor a court-ordered role as trustee of the liquidating trust, a position it accepted under Linqto's confirmed Chapter 11 plan. That plan, approved in February, was designed to distribute recovered assets to more than 13,000 customers who were harmed in a fraud that led to the company's collapse.
On July 15, just five days before the trust was scheduled to begin operations, Forge informed Linqto it would not perform its duties, citing demands from Schwab, which completed its acquisition of Forge earlier this year. Linqto and its official committee of unsecured creditors responded by filing a complaint in the U.S. Bankruptcy Court for the Southern District of Texas, seeking to compel Forge to honor its contractual commitments. The move has further delayed a recovery process that has already stretched more than a year, leaving customers in limbo.
“In today's hearing, the UCC and John Deaton expressed frustration with Forge. We agree. It's intolerable and wrong that Linqto is still in bankruptcy because of the unwillingness of Forge and Schwab to fulfill their obligation to serve as trustee of the Liquidating Trust,” said Dan Siciliano, Linqto's chief executive, in a Monday statement. The two sides told a judge in late July they were working toward a resolution, and a hearing was postponed while negotiations continued, according to court dockets tracked by Law360.
Fraud Allegations and the Collapse
The underlying case stems from claims that Linqto's former chief executive, William Sarris, misled customers into believing they were purchasing direct equity stakes in sought-after private companies like Ripple and SpaceX. Two customers sued Sarris in July 2025 in federal court in Manhattan, alleging he exploited investors' fear of missing out. “Unfortunately, Bill Sarris has not only not fulfilled that mission, he has damaged it,” plaintiffs' attorney John Deaton said at the time. “People believed they were buying shares of Ripple, shares of SpaceX, but that's not what they were buying.”
In reality, the equity stakes were held through special purpose vehicles rather than transferred directly to customers, a structure that complicated the bankruptcy recovery. Creditor attorney Kenneth Aulet told a court hearing last year that distributing shares directly to the roughly 8,000 customers who believed they owned a piece of Ripple would trigger securities-law consequences that Ripple itself would likely contest. “This is a fraud case,” Aulet said. “What Linqto promised and what it delivered are very very different.”
Linqto filed for Chapter 11 protection in July 2025 after new management uncovered what it described as historical failures to comply with U.S. securities laws. Shortly after, FINRA enforcement began investigating Linqto Capital, the platform's broker-dealer unit, as part of a broader probe. A FINRA filing with the SEC disclosed the investigation, noting potential involvement in a broader SEC investigation focused on the company's parent and its affiliated fund, Liquidshares. The company said it is fully cooperating with all regulatory inquiries.
Recovery Efforts and Delays
The bankruptcy estate includes interests in roughly 111 private companies valued at more than $500 million, including stakes in Ripple and SpaceX. A federal bankruptcy court confirmed Linqto's reorganization plan in February with support from about 95% of voting customers. Under that plan, customers can choose to receive shares in a publicly listed closed-end fund, hold interests in a liquidating trust, or take a combination of both. Linqto said the value of the underlying customer-linked securities has climbed from $657 million in June 2025 to $1.3 billion in May 2026, even as the legal wrangling over who administers the payout has intensified.
Despite the Forge dispute, the bankruptcy estate has managed to generate proceeds for customers. In July, a U.S. Bankruptcy Court approved the sale of roughly $130 million in Ripple common shares to four institutional buyers, led by Galaxy Digital, with proceeds directed to the wind-down trust supporting customer recoveries. Ripple waived its right of first refusal to allow the sale to proceed. Linqto has not said when it expects distributions to begin, but the company is exploring alternative paths to exit Chapter 11 protection as quickly as possible if Forge continues to withhold cooperation.
The case highlights the risks of investing in private markets through fintech platforms, a topic of growing interest to advisors. For more on how Schwab is navigating the digital asset space, see Schwab's crypto trading rollout. Meanwhile, the broader regulatory environment for such platforms remains under scrutiny, as seen in other bankruptcy cases involving broker-dealers.
