The leading publicly-listed remittance company, MoneyGram International, faces a class-action lawsuit for alleged misrepresentation of its collaboration with Ripple and XRP token. The investors filed the class-action lawsuit on March 1 in California. The investors involve people who purchased MoneyGram’s securities between June 17, 2019, and February 22, 2021. MoneyGram entered into a strategic alliance with Ripple in June 2019. The alliance was in exchange for a $30 million investment from the San Francisco-based startup.
Further, MoneyGram highlighted that it would employ Ripple’s xRapid product, later rebranded as ODL, and leverage “XRP in foreign exchange settlement” as a component of its cross-border payment method. The global payment firm later in December 2020 declared it is not reliant on Ripple’s xRapid service for its foreign exchange trading requirements. It was renamed to On-Demand-Liquidity or ODL in 2019, going against its previous request. This provoked the lawsuit.
MoneyGram suspended collaboration with Ripple
MoneyGram suspended Ripple’s collaboration due to the ongoing litigation and concerns of the regulatory wrath. SEC moved Ripple to courts accusing XRP as a security. SEC claimed XRP was security and not an asset which Ripple insisted it is. The lawsuit filed against the payment firm also accused that MoneyGram. Apparently, the latter declined to disclose that XRP is an unregistered and unlawful security by the SEC. Hence if SEC chooses to implement securities laws against Ripple, the payment firm would probably lose the profitable stream of market development fees critical to its financial result.
Ripple paid MoneyGram for making use of its platform while offering incentives to assist startups in extending into larger markets. As per The Wall Street Journal, the payment firm got $38 million in net market development fees from Ripple in 2020, depicting around 15% of its adjusted earnings. If XRP is struck, the blow will transpose significant losses for the payment giants. The agreement between the two companies was due to expire in 2023. However, with the SEC lawsuit, Moneygram terminated the agreement beforehand.
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