Payments company MoneyGram International has been sued over alleged false statements, made regarding its partnership with Ripple Labs and their XRP cryptocurrency.
The class action lawsuit, filed on March 1 in California, was submitted on behalf of investors who purchased securities from MoneyGram between June 17, 2019, and February 22, 2021.
The global investor rights legal practice assert MoneyGram made fraudulent statements regarding its partnership with Ripple Labs and the status of XRP as a security.
According to the a post announcing a “strategic partnership” between the two companies in June 2019, MoneyGram utilized Ripple’s xRapid product, “leveraging XRP in foreign exchange” settlements as part of its cross-border payment process.
However, on Dec. 23, 2020, the company clarified it is not dependent on Ripple’s xRapid service for its foreign exchange trading needs — which was rebranded to On-Demand-Liquidity or ODL in 2019:
“MoneyGram does not utilize the ODL platform or RippleNet for direct transfers of consumer funds – digital or otherwise. Furthermore, MoneyGram is not a party to the SEC action.”
MoneyGram suspended the partnership with Ripple in late February after the U.S. Securities and Exchange Commission filed a complaint against Ripple Labs alleging securities violation in December 2020.
Rosen alleges that MoneyGram failed to disclose that XRP was viewed as an unregistered and unlawful security by the SEC.
Additionally, in the event that the SEC decided to enforce securities laws against Ripple, MoneyGram would be likely to lose the lucrative stream of market development fees that was critical to its financial result, Rosen added:
“As a result, defendants’ public statements were materially false and/or misleading at all relevant times. When the true details entered the market, the lawsuit claims that investors suffered damages.”
Ripple paid MoneyGram for using its platform while providing financial incentives for helping the startup expand to new markets.
TheWall Street Journal reported that MoneyGram received $38 million in net market development fees from Ripple in 2020, representing about 15% of the company’s adjusted earnings.
The agreement between the two companies was due to expire in 2023, with the San Francisco fintech firm also having agreed to invest up to $50 million in MoneyGram.