U.S. SEC Sues Two Former Linqto Executives, Alleging Fraud of Over $430 Million Against Retail Investors

BlockBeats news, October 11: The U.S. Securities and Exchange Commission (SEC) announced that it has sued two former executives of Linqto, a private company investment platform headquartered in San Jose, California, William Sarris and Joseph Endoso, accusing them of misleading and defrauding thousands of retail investors hoping to invest in pre-IPO unicorn companies. According to the SEC's complaint, between 2021 and 2024, a subsidiary of Linqto sold more than $430 million worth of special purpose vehicles (SPVs) to retail investors, which held interests in private companies.

The SEC alleges that Sarris and Endoso claimed that the platform's quotes reflected current market conditions or were below market prices, but that the pricing of almost all products was in fact above fair value; the two are also accused of falsely claiming that some securities had sold out or been fully subscribed, and of claiming that the platform used an algorithm to dynamically adjust prices based on investor demand, while pricing was in fact still done manually by employees. In addition, although the company's legal counsel had informed them that its business violated federal securities regulations, the two still told investors that Linqto complied with relevant legal requirements. The complaint also accuses the two of illegally operating an unregistered investment company and illegally selling unregistered securities through the subsidiary to investors who did not qualify as accredited investors.

The SEC charges the two with violating the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934, and with aiding and abetting Linqto in committing related violations, as well as allegedly violating securities registration requirements and relevant provisions of the Investment Company Act of 1940; Sarris is also accused of being liable as a control person. The SEC has sought a court-issued injunction, disgorgement of ill-gotten gains and related prejudgment interest, civil penalties, and a ban on the two serving as officers or directors of public companies. The investigation was handled by the SEC's San Francisco Regional Office, with assistance from the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation (FBI). The above contents are all allegations raised by the SEC and remain subject to further adjudication through judicial proceedings.