MoneyGram International has been sued over false statements the company allegedly made regarding its partnership with fintech company Ripple Labs that involved the XRP token.
The class action lawsuit was filed on March 1 by Rosen Law Firm on behalf of MoneyGram’s investors who purchased shares in the company between June 17, 2019, and February 22, 2021.
The New York-based firm asserts that MoneyGram misled the investors about its partnership with Ripple and the legal status of the XRP token.
According to the document, during the last few years, the US Securities and Exchange Commission (SEC) viewed XRP as an unregistered security. This means that, should the regulator enforce the securities laws against Ripple, MoneyGram would lose “the lucrative stream of market development fees,” something the lawyers describe as “critical” to the company’s financial results.
As reported by The Wall Street Journal, MoneyGram received $38 million in net market development fees from Ripple in 2020, which is around 15% of the company’s earnings.
The lawsuit also claims that MoneyGram’s investors suffered damages when the true details were made public.
How MoneyGram teamed up with Ripple
MoneyGram and Ripple entered into a strategic partnership in June 2019, with the latter having agreed to invest up to $50m in the remittance company. That same year, MoneyGram started using Ripple’s cross-border payment platform, xRapid—later rebranded as On-Demand Liquidity (ODL)—leveraging the XRP token for cross-border payments.
By the end of 2020, when the SEC charged Ripple with raising $1.3 billion in an unregistered securities offering, it held about 17% of MoneyGram’s outstanding shares.
Despite initial statements that the case against Ripple is unlikely to have any negative impact on the relationships between the two companies, in February 2021 MoneyGram announced the suspension of its partnership with the Californian firm.