(Bloomberg) — Collapsed fintech startup Linqto Inc. won court permission to try to sell valuable stakes in hard-to-acquire, private companies so it can fund its bankruptcy case.

Linqto did not list which securities it would try to liquidate, but said they would come from a portfolio worth more than $500 million. It had acquired the stakes for itself and customers before the online investment platform shut down and filed bankruptcy while being investigated by federal regulators.

The firm’s demise highlights the dangers to retail investors of buying stakes in illiquid and hard-to-value assets. It comes just weeks after President Trump signed an executive order that will make it easier for 401(k) participants to invest in private markets, which have minted fortunes for some and ended in huge losses for others.

Linqto, which began offering private investments in 2020, was part of a wave of financial companies that claimed to make private markets more accessible. Its offerings — which included stakes in crypto startup Ripple and AI firm CoreWeave Inc. — drew in individuals attracted to the allure of private markets.

The US Securities and Exchange Commission is investigating Linqto and whether former managers failed to verify if some of its customers were accredited investors with sufficient financial backing to invest through the company. 

Linqto had told its 13,600 customers that they could buy stakes in some of the hottest private companies before the firms went public, something that’s typically available only to big institutions. That turned out to be wrong, Linqto bankruptcy attorney Samuel A. Schwartz said in court last month. 

In reality, the securities could not be transferred directly to customers for various technical reasons, including regulatory limits, the company has said. Among the positions claimed by Linqto in court papers are a $399 million stake in Ripple, $35 million of Space Exploration Technologies Corp. equity and $106.6 million worth of shares in publicly held fintech Circle Internet Group Inc.

As part of the bankruptcy case, Linqto’s new managers will avoid an expensive court fight over who has title to the securities, which is a complicated question tied to federal rules for accredited investors, Schwartz said during a court hearing Tuesday in Houston.

No sale would be final until customers have a chance to claim ownership of any of the securities, according to court documents.

The case is Linqto Texas, LLC, 25-90186, US Bankruptcy Court, Southern District of Texas.

–With assistance from Neil Callanan.

(Adds details in the third and seventh paragraphs.)

More stories like this are available on bloomberg.com