Former CEO of Linqto, William Sarris, slammed with a securities fraud class action lawsuit

The Linqto drama continues this week with a new court filing targeting the former CEO of the company, William Sarris. 

According to reports, popular Ripple advocate, John E. Deaton has filed a securities fraud class action against Sarris on behalf of thousands of retail investors, even as the company’s shareholders move to fight an effort by its new management to reorganize the troubled company in bankruptcy.

Executive accused the company of internal and systemic compliance failures

The suit Deaton filed accuses Sarris of orchestrating a multi-year scheme with undisclosed markups (as high as 60%), misleading exemptions, and unlicensed sales tactics to peddle shares in private companies like Ripple and Kraken via SPVs on Linqto’s platform.

The filing alleges Sarris ignored internal legal memos in 2023 and 2024 that warned that the offerings violated multiple SEC and FINRA rules, including acting as an unregistered broker-dealer as well as running unregistered investment companies.

According to Deaton, the lawsuit targets Sarris personally and is not subject to bankruptcy protections. The lawyer also vowed that any recovery from liability insurance or settlement will go toward trying to make innocent investors whole.

The filing comes several months after another lawsuit by former Chief Revenue Officer Gene Zawrotny in October 2024. Zawrotny alleged internal and systemic compliance failures, and claimed that he was dismissed after raising concerns.

Linqto has now filed for Chapter 11 bankruptcy, amid SEC and FINRA investigations, citing “serious defects” in its corporate structure and operations that raised questions about what customers actually own.

However, new managers of the company have vowed to resist any claims.

Linqto shareholders to fight bankruptcy

Managers who took over in recent months have put Linqto under court protection in Houston due to the scandal. Sapien Group, an Australia-based investment firm, has said it has the support of 52% of shareholders for its campaign to challenge current managers in bankruptcy.

To that end, Sapien has consulted bankruptcy lawyers it hired for advice on whether to try to dismiss the Chapter 11 petition or take other action.

Regardless of what happens, they claim to have an unchanged objective, which is to preserve the value of Linqto and the value of the shareholders’ investments.

Meanwhile, the US Securities and Exchange Commission’s (SEC) investigation into Linqto and whether its former managers failed to do due diligence to ascertain if its customers were accredited investors with sufficient financial backing to invest through the company continues.

According to company bankruptcy attorney Samuel A. Schwartz, Linqto’s advisers are planning to use the bankruptcy process to raise funds to repay customers and other creditors. However, before it presents a detailed proposal to creditors for a vote, the company will try to negotiate a bankruptcy payout plan with regulators.

“We think we have significant resources to make distributions to customers,” Schwartz told US Bankruptcy Judge Alfredo R. Perez. It now has a $60 million loan lined up from Sandton Capital Partners to fund its Chapter 11 bankruptcy, a loan it says it needs because very little cash has been generated by the business since it suspended its operations in March.

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