Gene Zawrotny, former Chief Revenue Officer of Linqto, has filed a lawsuit against the Delaware-based investment firm and two executives, alleging fraud, market manipulation, and other misconduct. The suit, filed on October 7, 2024, in Santa Clara County, California, accuses Linqto of inflating its user base, engaging in insider trading, and manipulating share prices. These allegations, recently gaining traction on social media, have sparked concern among the XRP community.

Key Allegations Against Linqto

1. Misrepresentation of User Base and Use of Unlicensed Brokers:

Zawrotny claims that Linqto exaggerated its user count, asserting 750,000 users while, according to him, the firm only has around 10,000 users, of which 30% are accredited investors. He further alleges that the company employed unlicensed brokers, raising concerns about regulatory compliance.

2. Price Manipulation and Compliance Violations:

The lawsuit alleges that Linqto artificially inflated share prices beyond the 150% markup limit recommended by FINRA. Zawrotny claims Linqto used proprietary algorithms to create a false sense of scarcity, encouraging investors to believe shares were in short supply and driving demand artificially. He also accuses Linqto of ignoring SEC regulations despite executive awareness of potential compliance issues.

3. Employment Termination and Stock Option Dispute:

Zawrotny states he was terminated after raising compliance concerns and claims Linqto’s executives promised a lucrative salary and stock options, which were never realized. He argues his firing after only 107 days was intended to prevent his stock options from vesting.

Legal Demands from Zawrotny

Zawrotny seeks an injunction, recovery of legal costs, punitive damages, and compensation for general and special damages. He asserts that Linqto’s actions have negatively impacted his career and financial stability.

Background on Linqto

Founded in 2018, Linqto provides investors with access to private markets, including opportunities to invest in pre-IPO Ripple stock. Recently, Linqto announced plans to accept XRP as a payment option for tokenized private equity, with XRP confirmed as a non-security. Ripple CTO David Schwartz has publicly endorsed Linqto as a legitimate platform for investments in startups, including PolySign, where he is a board member.

Recent Developments

Linqto recently canceled its planned $700 million merger with Blockchain Coinvestors Acquisition Corp. The Business Combination Agreement was formally terminated on September 26, 2024.

The lawsuit and its allegations of misconduct cast uncertainty over Linqto’s future operations and reputation within the private investment community. The XRP community and investors are closely watching the case for further developments.

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