FINRA Probes Linqto Broker-Dealer as Pre-IPO Platforms Face a Tough Five Years
FINRA Enforcement is investigating Linqto Capital, the broker dealer arm of Linqto Inc., which filed for Chapter 11 bankruptcy last month in Texas after halting operations this summer. Linqto had marketed access to shares of high profile private companies before their IPOs, but court and law firm filings now confirm bankruptcy proceedings and creditor negotiations. Additional reports note disputes over venue, investor litigation tied to past representations, and efforts to sell Linqto’s holdings in private companies.
The probe comes at the end of a volatile five year cycle for the pre IPO and secondary markets, where multiple business models have struggled or been forced to consolidate, pivot, or shut down. In January 2024, Carta announced its exit from the secondaries business after complaints about conflicts between its cap table data and trading arm. SharesPost merged with Forge Global in 2020, signaling that scale and regulatory capacity were becoming essential. FINRA has already pursued enforcement actions in this area, including a 2023 case expelling a broker dealer for Reg BI failures tied to pre IPO private placements. Other platforms have endured layoffs as IPO windows closed and retail demand for private shares softened. Meanwhile, activity has migrated toward issuer led liquidity, such as tender offers and structured secondaries run through established venues, with Nasdaq Private Market reporting a resurgence in 2024 and 2025.
The recurring challenges for pre IPO models are clear. Information asymmetry and conflicts remain a constant risk, especially when platforms control both company data and order flow, as the Carta episode highlighted. Disclosure and suitability obligations continue to present vulnerabilities, as retail pitches for late stage private shares must explain liquidity limits, valuation issues, and transfer restrictions while documenting best interest rationales. Market cyclicality plays an outsized role, as IPO slowdowns and valuation resets can dry up demand, making it difficult to source or price inventory and straining compliance budgets. Scale and supervision also matter, as larger venues with the resources for surveillance and oversight tend to outlast smaller rivals.
Observers are watching three key developments. FINRA’s inquiry into Linqto Capital could set expectations for how retail oriented pre IPO models will be regulated going forward. Bankruptcy proceedings will reveal how assets are sold and how creditors and investors are treated, and whether any operations are preserved under new ownership. And industry structure is likely to continue drifting toward issuer led liquidity, with more company run tenders and fewer open retail marketplaces, anchoring compliance and disclosure frameworks to corporate events rather than continuous trading.
Sources: InvestmentNews: “FINRA investigating B-D arm of Linqto, bankrupt pre-IPO trading platform,” Aug. 2025. (InvestmentNews), Brown Rudnick: representation of the Official Committee of Unsecured Creditors in the Linqto bankruptcy, July 28, 2025. (Brown Rudnick), Bloomberg: Linqto wins permission to pursue sales of stakes in private firms, Aug. 19, 2025. (Bloomberg.com), Wall Street Journal: venue dispute in Linqto Chapter 11, July 2025. (The Wall Street Journal), Reuters: investor lawsuit against Linqto’s former CEO following bankruptcy, July 9, 2025. (Reuters), TechCrunch & Axios: Carta exits the secondaries business (Jan. 2024). (TechCrunch, Axios), Business Wire: Forge completes merger with SharesPost (Nov. 9, 2020). (Business Wire), Nasdaq Private Market reports and market coverage on issuer-led liquidity and tenders (2024–2025). (Nasdaq Private Market, The Wall Street Journal)This article is provided for industry awareness and does not constitute legal or investment advice.