MoneyGram joins the list of companies distancing themselves from operating with Ripple due to the ongoing SEC case. The move was effected during a Q4 earnings release by the global money transfer engine on February 22, 2021.
Initially, MoneyGram remained keen on how far the Ripple-SEC case would fare. However, the wait-and-see approach proved ineffective as the Dallas-based money transmitter further stressed that it has no link whatsoever with the ongoing lawsuit.
On top of that, it also mentioned that it no longer leverages Ripple’s transfer products, RippleNet, and the ODL ecosystem. Going by the report, MoneyGram does not project profiting from the collaborative deal during the first quarter of 2021.
Past Relationship Between the Duo
Before deciding to put the partnership on hold, MoneyGram, in conjunction with Ripple, worked towards providing a fast and reliable money transfer system through the On Demand Liquidity solution. Ripple made their first investment in mid-June 2019, which amounted to $30 million.
At the end of 2019, Ripple made an additional $20 million investment with MoneyGram, bringing the total investment to $50 million. Blending digital and traditional transfers meant penetrating MoneyGram’s services across Australia and Europe.
In return, Ripple would possess 9.95% common stock from MoneyGram and another payable stock of 15% if all securities are converted into shares. Generally, the two-year deal would boost MoneyGram’s functionalities and operations to its global user base.
The Ripple Lawsuit
On December 22, 2020, the Securities and Exchange Commission moved to court, allegedly reporting that Ripple conducted an unregistered securities offering. The legal action further pointed out that Ripple’s co-founder, Chris Larsen, and the current CEO Brad Garlinghouse, as the two executives who raised XRPs worth $1.3 billion.
On top of that, the two executives also took part in orchestrating private XRP sales amounting to $600 million. According to the laws in place, failure to register for a security sale goes against the federal securities law since it denies an investor the knowledge of Ripple’s business operating in a public market.
Various platforms began withdrawing their services and partnerships with Ripple moments after the SEC case. Prominent cryptocurrency exchanges such as Binance and Coinbase moved to delist XRP from their trading systems.
However, Ripple came out strong to defend itself through their company blog, saying that XRP is a digital currency and not an investment contract. On the same blog, Ripple clearly states that major government branches such as the Treasury and Justice department recognize Ripple’s native coin as a currency, thus making it an unlawful legal action.