The US SEC’s $1.3 billion lawsuit against blockchain payments company Ripple’s, illegal sale of XRP tokens, which the SEC considers security, has now dragged in Ripple backer MoneyGram in the scene. Per recent reports, the global remittance giant is now facing a lawsuit alleging the firm issued misleading statements and failed to disclose XRP’s status as unlicensed security.
According to the class-action lawsuit filed on March 1 in California, the suit represents investors who purchased securities from MoneyGram between June 17, 2019, and February 22, 2021. The global investor rights legal practice states that MoneyGram made false statements in regards to its relationship with Ripple.
MoneyGram had previously stated via an announcement that it utilized Ripple’s xRapid product, “leveraging XRP in foreign exchange” settlements as part of its cross-border payment process. The following year, the firm noted that it doesn’t depend on Ripple’s product for its foreign exchange trading needs.
“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.”
The firm then went on to suspend its partnership with Ripple last month after the SEC filed its complaint regarding the XRP sales which violated securities laws.
The current filing alleges that MoneyGram did not disclose to its investors that XRP was an unregistered and unlawful security in the eyes of the SEC. Also, if the SEC decides that XRP is a security and imposes securities laws, MoneyGram would lose the stream of market development fees that was critical to its financial result. The filing 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.”
How MoneyGram benefitted from Ripple partnership
Ripple has had close financial ties with the remittance giant since a $30 million investment in the company’s equity and a commercial agreement for cross-border settlement using digital assets early in 2019. It has also provided financial incentives to MoneyGram for using its platform while helping the startup expand to new markets.
As of now, MoneyGram has received $38 million in net market development fees from Ripple in 2020. This represented 15% of the company’s adjusted earnings.