Linqto Inc. Bankruptcy: Shareholders Seek Protection in Delaware
(Bloomberg) – Shareholders of the beleaguered Fintech company Linqto Inc. are urging a Texas federal judge to transfer the company’s bankruptcy filing to Delaware, where they believe their rights will be better safeguarded against the new management’s decisions.
Shareholders Challenge New Management Decisions
The investment firm Sapien Group filed documents on Wednesday indicating that shareholders are looking to contest the actions taken by Linqto’s board following the appointment of a new managing director, Dan Siciliano, who replaced founder Bill Sarris.
Concerns Over Improper Bankruptcy Filing
According to the court filing, the new management team at Linqto has allegedly created an entity named Linqto Texas, which they used as justification for filing bankruptcy in Texas instead of Delaware, where the parent company is incorporated.
The Battle Over Jurisdiction
Delaware has long been regarded as the preferred jurisdiction for corporate filings, yet recent controversies have sparked criticism from high-profile founders, including Elon Musk. Critics argue that Delaware’s courts may show bias against entrepreneurs, which has prompted Texas officials to promote their state as a more favorable option for companies.
Legal Allegations Against Current Management
Sapien claims that the current board’s actions violate Delaware law, emphasizing that shareholders should have the opportunity to address their grievances in a Delaware bankruptcy court. They argue that the current setup represents an inappropriate forum shopping tactic.
Defending the Texas Filing
In response, Linqto has defended its Texas bankruptcy filing, asserting that the local court possesses the necessary expertise to handle the case. The company stated that their sole objective is to maximize the value for their creditors through a Chapter 11 restructuring.
Overview of Linqto’s Management Issues
Under Dan Siciliano’s leadership this year, an internal investigation revealed mismanagement by previous executives, who allegedly misled customers regarding their investments in private companies worth over $500 million. According to Linqto’s bankruptcy attorney, Samuel A. Schwartz, many original leaders have been let go in light of these findings.
Regulatory Scrutiny and Future Plans
As regulatory scrutiny deepens, the U.S. Securities and Exchange Commission has commenced an investigation into Linqto’s practices, particularly regarding whether previous management ensured that investors were accredited and financially qualified to invest. Linqto’s advisors plan to leverage the bankruptcy process to settle debts with customers and other creditors, as they aim to negotiate a workable repayment plan.
The case is filed under Linqto Texas, LLC, 25-90186, in the U.S. Bankruptcy Court, Southern District of Texas, Houston.
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