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Blockchain payments firm Ryvyl Inc. has struck a settlement with investors to end a derivative lawsuit accusing the company’s leadership of hiding accounting problems that sent its stock price tumbling and inflicted financial damage on the business.

Court Says Negotiations Appeared Fair

U.S. District Judge Gonzalo P. Curiel issued a preliminary blessing Friday, finding the parties’ negotiations appeared fair and transparent. A final approval hearing is slated for Jan. 9, according to the court order.

The deal requires the San Diego-based fintech company to overhaul its governance — adding an independent director, creating a risk and disclosure committee, and implementing enhanced risk-assessment training for employees. These corporate reforms must remain in place for at least three years.

“Meant to Become Embedded,” Judge Says

Judge Curiel wrote that these structural changes are expected to deliver “substantial benefits” to the company and are designed to stay in place long enough to root themselves in Ryvyl’s corporate culture.

“The reforms’ benefits are bolstered by the fact that Ryvyl will implement and maintain the reforms for three years following the effective date of the settlement,” the order states. “This is meant to be a sufficient time for the reforms to become embedded in the company’s policies, practices, and corporate culture.”

Shareholder Attorneys to Receive Cash and Shares

Under the agreement, counsel for the shareholders will collect $200,000 in fees and expenses, split into $25,000 in cash and $175,000 in settlement shares.

Stock Price Plunged After Disclosure of Faulty Statements

The lawsuit stems from investors’ claims that Ryvyl — formerly operating as Greenbox POS — failed to disclose serious accounting issues affecting its financial statements for 2021 and 2022. When the company announced in January 2023 that those statements “can no longer be relied upon,” its stock price dropped nearly 15%, closing at 70 cents per share.

Ryvyl later acknowledged that revised financials would likely show lower total revenue, larger net losses, reduced assets, and diminished stockholders’ equity.

Executives Also Accused of Inflating Repurchase Costs

Individual defendants include co-founders Ben Errez and Fredi Nisan, along with several current and former officers and directors. The suit alleges they oversaw stock repurchases that were overpriced by $12 million because the company’s valuations were artificially inflated.

Connected Class Action Nearing Its Own Resolution

The derivative suit also points to substantial litigation costs arising from a related securities class action. That separate case has already received preliminary approval for a $1 million settlement, with a final hearing set for Dec. 19.

Responses Pending

Representatives for both sides did not immediately respond to requests for comment Monday.

The investors are represented by Robert C. Moest of the Law Offices of Robert C. Moest and Timothy W. Brown of The Brown Law Firm PC.
Ryvyl is represented by Sean T. Prosser and Cesar M. Dulanto of Mintz Levin Cohn Ferris Glovsky and Popeo PC.