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BFD Expert Voices - Private Credit

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Linqto's former chief revenue officer, Gene Zawrotny, sued the private-share trading startup this month, alleging serious compliance failures and insider trading.

Why it matters: This is the second known case this year of a private-share platform coming under fire for its credibility.

Flashback: In January, it was discovered that one of Carta's salesmen on the secondaries side crossed what should've been an invisible wall, using confidential customer data from the mothership.

Carta exited the business amid a flurry of questions about the ethics of having both operations, with Public later buying those accounts without assuming the private share business.

Driving the news: Gene Zawrotny  — who was CRO for 107 days this year — alleges Linqto committed fraud and illegally laid him off in retaliation for raising concerns over the company's compliance issues.

Among those issues, Zawrotny claims Linqto marked up the prices of private securities above FINRA recommendation — at times above 150%.

Each time a unit was purchased, the company algorithm would automatically mark shares up by 30% to 35% at minimum, he said.

Behind the scenes: As a result, he alleges, insiders could exploit the algorithm.

"One insider asked customer service to expedite the onboarding of his friends' accounts so they could take advantage of the same automatic-increase function in Linqto's pricing algorithm," the lawsuit reads.

Linqto also violated federal regulations, Zawrotny alleges, by allowing unaccredited investors on to the platform. Linqto had said it had over 750,000 users worldwide, but only 10,000 had purchased anything using the app at the time of his employment, he says.

Zawrotny also raised the red flag on the term "pre-IPO," saying Linqto would market certain stock in that way, "even when there was no basis to believe that an IPO was contemplated, let alone imminent."

Context: Linqto had agreed to go public in a $700 million SPAC deal with Blockchain Coinvestors Acquisition Corp. in April. That deal was terminated in September.

Zooming in: Zawrotny's pay package included 500,000 stock options that would vest a year after his first day of employment, a milestone he never hit.

"We disagree with the allegations, and we will vigorously defend against them," a Linqto spokesperson said in an emailed statement.

Former exec at private share investing startup Linqto sues alleging fraud

It's the second case of a pre-IPO trading platform taking a credibility hit this year.

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Fintech

Linqto&#x27;s former chief revenue officer, Gene Zawrotny, sued the private-share trading startup this month, alleging serious compliance failures and insider trading.Why it matters: This is the second known case this year of a private-share platform coming under fire for its credibility.

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Former exec at private share investing startup Linqto sues alleging fraud

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