Welcome to the ninth edition of our monthly newsletter on real estate crowdfunding, with all the property investment gossip, platform drama, and regulatory shenanigans that's fit to print.
Linqto's Alleged Law-Breaking Ends in Total Meltdown
Just when you thought the Nightingale scandal was the worst thing to hit private-market investing platforms in a long time, along comes Linqto to show everyone how it's really done. (To be clear, Linqto doesn’t offer shares of real estate, but the story has far-reaching implications for the rest of the fintech industry.)
The San Jose-based firm that promised to "democratize" private equity investing has collapsed spectacularly, facing federal investigations, possible bankruptcy, and customers discovering they may never have owned the securities they thought they bought, The Wall Street Journal reports.
CEO William "Wizard of Oz" Sarris — yes, that was his actual nickname — treated customer funds like his personal piggy bank and SEC markup rules like polite suggestions. When pushing Ripple shares during a January 2023 "Spike Day," Sarris marked up prices by 60% above cost while regulations cap markups at 10%. His battle cry to staff? "This is guerrilla warfare. Take no prisoners."
Internal emails show the 74-year-old regularly overrode company lawyers, writing "Forget what legal says" when employees raised compliance concerns. His customer acquisition philosophy was equally sophisticated: "When we go for a Spike Day (over $1M in sales), we sometimes have to pull out all stops and even sell to the unwashed. 😊"
Linqto's business model relied on creative interpretations of accredited investor rules and special purpose vehicles (SPVs) that may not have actually held the securities customers thought they owned. The company signed up roughly 100 customers from sanctioned nations like Iran and North Korea and allowed non-accredited investors to participate in deals reserved for qualified buyers, which is illegal.
The platform's 750,000 registered users are now locked out of their investments while federal investigators sort through the wreckage. Among the casualties: Massachusetts lawyer John Deaton, who invested $495,000, and Pennsylvania resident Thomas Lennon, who put $10,000 into Ripple shares despite not being accredited.
New CEO Dan Siciliano, brought in to clean up the mess, diplomatically notes that "much of what we discovered about the prior business practices at Linqto is disturbing." If the company files for bankruptcy as expected, customers will become unsecured creditors — a fancy way of saying they'll be waiting in a very long line to maybe get some money back.
(Pictured: Linqto CEO Bill Sarris.)
CrowdStreet's Awkward Timing on "Trust" Campaign
CrowdStreet unveiled a new branding campaign in May focused on "trust" and "confidence" — just weeks before the Linqto scandal broke wide open. The platform, still nursing reputation wounds from the Nightingale scandal (Nightingale CEO Elie Schwartz was recently sentenced to 7 years in prison), decided this was the perfect moment to lecture everyone about investment platform integrity.
The rebrand transitions from one word (CrowdStreet) to two words (Crowd Street) to create a "timeless utility" that positions itself as the Wall Street of private markets — because apparently adding a space is the secret to making people forget about $63 million in fraud losses perpetrated by one of the sponsors you partnered with. The new logo is described as a "symbolic gateway to a realm of new investment opportunities" with the tagline "Welcome to your home for direct access to private market investing."
But wait, there's more! In early June, CrowdStreet announced additional platform enhancements including "improved portfolio transparency, streamlined reporting tools, tax enhancements, and a better offering page." CEO John Imbriglia claimed they're "reducing friction and empowering individual investors to make confident decisions" — which is ironic considering the friction their investors experienced trying to get money back from fraudulent deals.
COO Shaun Mulreed says they're "removing obstacles that impede participation," though apparently those obstacles don't include basic fraud detection. The gap they're really bridging is between marketing speak and reality.
CrowdStreet's expansion plans also include adding private equity and private credit to their real estate focus. The company boasts $4.4 billion invested through its platform, though they're notably quiet about how much investors actually got back.
Landa's $5 Real Estate Dreams Turn Into Investor Nightmares
Landa promised to make "real estate investing accessible to everyone" with $5 minimums but has gone dark, leaving users locked out of their funds and wondering if their investments ever existed. The proptech startup raised $33 million to democratize residential real estate investment through fractional shares, requiring only that users be over 18 and U.S. residents.
New reporting from TechCrunch sheds light on the situation: Landa's investment portal is down, the app doesn't work, and users haven't received dividends in months. Over 130 complaints have been filed with the Better Business Bureau, including one user who invested over $8,000 and hasn't seen a penny since last fall. When customers ask about their money, Landa's customer service gives them the runaround with vague promises that they're "working on it."
The real kicker? Landa's primary lenders, Viola Credit and L Finance, are suing the company for over $35 million in loan defaults. The lawsuit reveals missed property tax payments leading to forced sales, neglected properties, and failure to collect rents. After trying for over a year to get Landa to honor commitments, the lenders had to remove the company as property manager and appoint independent oversight.
Despite court injunctions blocking Landa from accessing bank accounts, the company allegedly told tenants to send rent payments to different accounts not covered by the ruling. When confronted by the court, instead of explaining themselves, Landa asked for a restraining order against their own lenders (appalling!). The judge denied the request and ordered Landa to pay nearly $100,000 in penalties.
When TechCrunch asked CEO Yishai Cohen about the platform's issues in April, his response was peak startup deflection: "Of course not. The site will be back up." When pressed about why users couldn't access their funds, he blamed server issues — apparently unaware that "the server ate my homework" doesn't work when dealing with real people's money.
Landa isn't alone in the fractional real estate graveyard. Fintor pivoted to AI after raising millions, while Dallas-based Nada abandoned their model entirely. Arrived is one of the very few that is operating successfully, having paid out over $13 million in dividends to 766,000 registered investors.
The Landa collapse speaks to the fundamental challenge of ultra-low minimum investments in real estate. When you're promising $5 entry points, the unit economics have to work perfectly — and clearly they didn't.
See You Next Month
Thanks for reading. Stay tuned for more gossip, slander, and scuttlebutt.