SEC Sues Former Linqto Executives for Fraud Against Retail Investors in Northern California
On October 9, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit in the Northern District of California against two former Linqto executives, William Sarris and Joseph Endoso, accusing them of misleading and fraudulent practices while selling special purpose vehicles (SPVs) holding equity in private companies to retail investors through an online platform.
The complaint states that between 2021 and 2024, a subsidiary of Linqto sold over $430 million worth of SPVs to retail investors, corresponding to equity in multiple private companies; the SEC alleges that nearly all products were priced above fair market value, while claiming that the quotes reflected current market conditions or were below market levels.
The SEC further alleges that the two falsely claimed that certain securities were sold out or fully subscribed to create a sense of scarcity and asserted that the platform dynamically adjusted prices based on investor demand through algorithms, while actual pricing was done manually by employees; despite being informed by legal counsel that their business model violated federal securities laws, they continued to assert to investors that the platform complied with relevant legal requirements.
The complaint also alleges that the two operated an unregistered investment company illegally and sold unregistered securities to investors who did not meet accredited investor qualifications through the subsidiary; the SEC accuses them of violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, as well as related provisions of the Investment Company Act, with Sarris additionally being accused of control person liability.
The SEC seeks an injunction, recovery of illegal profits and pre-judgment interest, civil penalties, and a ban on the two from serving as executives or directors of public companies; the investigation is led 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 FBI. The related charges are pending judicial proceedings, and Sarris has previously stated he will contest the allegations.
This case occurs against the backdrop of Linqto having filed for bankruptcy protection in July 2025, with retail investors accessing pre-IPO equity in companies like Anthropic, Ripple, and SpaceX through the platform; high markups and information asymmetry have allowed the platform and related parties to capture premiums, while investors face difficulties in recovering their investments amid liquidity constraints and bankruptcy proceedings, driving regulatory tightening on similar private market retail access platforms.
In parallel criminal proceedings, Sarris faces multiple charges of securities fraud, while Endoso pleaded guilty in August 2026 and is cooperating with the investigation, indicating ongoing enforcement scrutiny on private securities pricing and registration exemptions.
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Sarris, as the founder of Linqto, has long led the platform's operations, previously selling equity in private companies to retail investors through SPV structures, and has been accused of creating scarcity and high markups in internal communications, a practice that continued from 2020 until the company's bankruptcy; Endoso, who participated in operations as a subsequent executive, chose to plead guilty and cooperate, reflecting the platform's trajectory from expansion to regulatory intervention.
Funds primarily flowed to SPVs controlled by the platform and related equity holders, extracting markups through pricing above fair market value and manual pricing mechanisms, some of which were used to enhance the platform's valuation and related personal interests; the motivation was to exploit information asymmetry in private markets to expand retail scale while evading registration requirements, ultimately placing investor interests in a subordinate position during bankruptcy proceedings.
Similar cases include several private market platforms facing SEC and DOJ investigations for insufficient markup disclosures and selling unregistered securities to non-accredited investors, currently transitioning from a lenient pilot phase to strict enforcement regarding retail access to private equity.
Essentially, this involves a transfer of pricing power: the platform controls the underlying securities' costs and inventory information, shifting the premium to retail investors through false market pricing and scarcity narratives, with regulators intervening through anti-fraud and registration provisions, forcing the industry to move from reliance on exemptions and algorithmic narratives to more transparent cost and qualification verification mechanisms.
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- Where there is information asymmetry, the premium is priced by those who control the inventory.
- Once a scarcity narrative can be created, prices are no longer determined by the market.
- Retail investors buy the story, while the platform sells the markup.