MoneyGram International, a publicly-listed remittance company, is facing a class-action lawsuit for alleged misrepresentation of its partnership with Ripple and XRP token.
According to a Cointelegraph report, the lead plaintiff of the lawsuit, which was filed in California on Monday, was an investor in MoneyGram and purchased the company securities between June 17, 2019, and February 22, 2021.
MoneyGram entered into a strategic partnership with Ripple in June 2019 in exchange for a $30 million investment from the San Francisco-based startup. Then, the remittance company detailed that it will utilize Ripple’s xRapid product, later rebranded as on-demand liquidity (ODL), and leverage ‘XRP in foreign exchange settlement’ as a part of its cross-border payment process.
MoneyGram received $38 million in net development fees from Ripple, which is around 15 percent of the company’s earnings, The Wall Street Journal reported earlier.
However, the remittance company was quick enough to distance itself from Ripple after the US regulator’s lawsuit alleging that XRP falls under the category of an unregistered security.
“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 wrote in a statement published on December 23, 2020.
Last month, MoneyGram further cut its ties with Ripple due to the ongoing litigation and concerns of the regulatory wrath on its established remittance business.
“Due to the uncertainty concerning their ongoing litigation with the SEC, the Company has suspended trading on Ripple’s platform,” MoneyGram stated.
The End of Ripple Partnership Might Dent MoneyGram’s Financials
The lead plaintiff of the class-action lawsuit is now alleging that MoneyGram failed to disclose that XRP could be viewed as a security and now if the court orders against Ripple, the remittance company would lose a significant stream of its market development fees.
“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,” the lawsuit added.