It seems that Ripple is not the only one under fire, as investors of MoneyGram recently sued the business for alleged misrepresentation. All the problems started when the US Securities and Exchange Commission sued its long-term partner, Ripple. The regulator sued Ripple for selling unregistered tokens to people, thereby depriving them of some rights as investors.
The fintech firm remains adamant about XRPs not being securities and asking the regulatory body to defend its basis for suing Ripple on being a security. The company had tried to settle with the regulatory body before the exit of essential executives, leaving the office due to the tenure change. Now, MoneyGram is facing some problems of its own as investors believe that the firm had misrepresented XRP’s legal status.
Investors asserted that MoneyGram misstated XRP’s legal status
When the lawsuit happened for Ripple on December 12, MoneyGram immediately disassociated itself from the issues while ensuring that it would closely monitor the suit. The suit led to Ripple’s problems as XRP witnessed a continuous price fall before eventually being delisted from major exchanges.
Now, XRPs have gained a significant amount of value back, but legal battles are still ahead of the asset’s team. MoneyGram is getting some heat due to the incident as investors turned against the business while demanding compensation.
The investors opine that the firm misrepresented the status of XRPs, which is the token owned by its partner, Ripple. The agitated group filed the suit through Rosen Law Firm on March 1. The law firm represents the group of investors that joined the firm around June 2019 and February 2021.
Based in New York, the law firm said that the business had misstated its relationship with Ripple and its token. The statement read that the watchdog saw the token as an unregistered security, thereby a misrepresentation caused by MoneyGram
MoneyGram to lose significant income avenue due to SEC’s suit
Rosen law firm said that if SEC eventually wins against Ripple in the current legal battle, MoneyGram could lose the lucrative stream of market development fees. The attorney asserts that the fees are essential for the company’s financial stance. Wall Street Journal’s report sheds more light on the development fee the lawyer was talking about.
The report shows that MoneyGram received almost $40 million for the development fee last year. The fee made up around 15% of the company’s revenue for 2020. The lawyer also asserted that the investors were significantly affected by SEC’s suit.
Ripple and MoneyGram became business partners in 2019 after the fintech said it would invest some money into the remittance firm. Because of their partnership, MoneyGram was able to utilize Ripple’s platform for cross-border payments.
The remittance company utilizes XRPs to settle cross-border payments due to their collaboration. Although MoneyGram had opined that the suit would not damage Ripple’s relationship and itself, the remittance company eventually suspended its partnership with the fintech in February. Both of the firms would likely have more than enough suits to handle before removing the suspension.