Carta, the company responsible for managing cap tables for around 40,000 privately funded startups, is exiting the secondary trading business. This decision comes in the wake of a conflict of interest scandal, prompting the company to temporarily halt sales outreach for its primary business.

In a blog post on Monday, Carta CEO Henry Ward announced the company’s withdrawal from the secondary trading business to address concerns about potential conflicts of interest with founders. The move follows accusations of self-dealing raised by the CEO of Linear on social media over the weekend, alleging that Carta used his startup’s confidential data without permission for its own secondary market platform.

Carta attributed the incident to a rogue employee and temporarily suspended all sales outreach as a response to the allegations. Chief Revenue Officer Jeff Perry communicated the pause in sales outreach to employees through an internal Slack channel, stating that it was expected to last only a few days and emphasizing the importance of reassuring customers about their trust in Carta.

In his blog post, Ward acknowledged the breach of privacy protocols and ongoing investigations to prevent such incidents in the future. He also expressed doubts about Carta’s involvement in the liquidity business, which represents a small portion of its annual revenue compared to its core cap table business. Ultimately, Ward concluded on Monday that Carta would no longer participate in the liquidity business due to the perceived risks associated with the use of confidential data.

Ward emphasized the importance of maintaining trust and transparency with customers, stating that the appearance of impropriety, even if unfounded, can be damaging. Moving forward, Carta will refocus on its core strengths, specializing in cap table and fund administration software, while supporting others working on private market liquidity solutions from the sidelines.