Payment company MoneyGram International has been sued over alleged false statements regarding its partnership with Ripple Labs and their XRP cryptocurrency.
The class action lawsuit, filed in California on March 1, was filed on behalf of investors who purchased MoneyGram securities between June 17, 2019 and February 22, 2021.
The global investor rights practice claims MoneyGram made fraudulent statements regarding its partnership with Ripple Labs and the status of XRP as collateral.
According to a release announcing a “strategic partnership” between the two companies in June 2019, MoneyGram used Ripple’s xRapid product to “use XRP in foreign exchange statements” as part of its cross-border payment process.
However, on December 23, 2020, the company made it clear that it does not depend on Ripple’s xRapid service for its forex trading needs – which was renamed On-Demand-Liquidity or ODL in 2019:
“MoneyGram does not use the ODL platform or RippleNet for direct transfers of consumer funds – digitally or otherwise. In addition, MoneyGram is not involved in the SEC action. “
MoneyGram suspended its partnership with Ripple in late February after the US Securities and Exchange Commission filed a complaint against Ripple Labs for violating the securities in December 2020.
Rosen claims MoneyGram failed to disclose that XRP was viewed by the SEC as an unregistered and unlawful security.
In the event the SEC decides to enforce securities laws against Ripple, MoneyGram would likely lose the lucrative stream of market development fees that is vital to financial results, Rosen added:
As a result, the defendants’ public statements have been materially false and / or misleading at all relevant times. When the real details hit the market, the lawsuit alleged that investors suffered damage. “
Ripple paid MoneyGram to use its platform while providing financial incentives for the startup to expand into new markets.
The Wall Street Journal reported that MoneyGram received net market development fees of $ 38 million from Ripple in 2020, which is roughly 15% of the company’s adjusted earnings.
The agreement between the two companies should expire in 2023. The San Francisco fintech firm also agreed to invest up to $ 50 million in MoneyGram.
