Restaurant and hospitality associations from across Canada are calling on an Ontario court to force XTM to repay the debts it owes to business operators stemming from the collapse of its EveryDay Payments platform.
On June 24, representatives from the BC Restaurant and Foodservices Association (BCRFA), Ontario Restaurant Hotel and Motel Association (ORHMA), Manitoba Restaurant and Foodservices Association (MRFA), and the Restaurants Association of Nova Scotia (RANS), issued a joint statement calling on the Ontario Superior Court to impose conditions on the sale of XTM’s EveryDay Payments platform that would require the buyer to contribute some or all of the debts owed to clients as part of the sale.
“The operators affected by this collapse are small and mid-sized businesses that had no reason to doubt a publicly traded payment platform.”
Shaun Jeffrey, Manitoba Restaurant and Foodservices Association.
The groups say XTM held a trust deficit of $18.75 million less than it owed to restaurant owners across the country. That number is backed up by XTM’s own financial reporting, which BetaKit reviewed earlier this year. It shows a shortfall between restricted cash held and platform deposits owed to customers of nearly $19 million. That financial reporting attributes the deficit to several contributing factors, including $5 million toward administrative and operating costs, “primarily overhead such as salaries.”
In late January, clients of XTM’s Edmonton-based subsidiary, EveryDay Payments, which was used to store and access client tips and staff wages in the service industry, allege that money in their digital wallets was removed without authorization.
After news of the incident broke, the Bank of Canada opened an investigation into the company, eventually ordering the publicly traded FinTech to cease retail activities. Soon after, the Canadian Investment Regulatory Organization (CIRO) halted the company’s stock..
In the intervening months, XTM filed for insolvency protection, engaging with the Companies Creditors Arrangement Act (CCAA), a federal law that allows insolvent companies with debt greater than $5 million to restructure their finances. CCAA reporting shows XTM as owing $91 million in liabilities.
A court-supervised sale of the platform is underway, with fellow Canadian FinTech company Pateno Payments listed as a potential, buyer. Pateno is offering $9.5 million CAD, representing the financing provided to XTM during its insolvency proceedings.
The four restaurant associations are calling for conditions to be set on that sale that would compel Pateno, or whomever buys the embattled platform to “contribute all or a meaningful portion in missing funds to a recovery pool for affected operators” before the winning bidder can take possession of the platform.
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“The operators affected by this collapse are small and mid-sized businesses that had no reason to doubt a publicly traded payment platform,” said Shaun Jeffrey, the executive director and CEO of the MRFA in a statement issued on Wednesday. “The court has the legal authority … to require a recovery contribution as a condition of sale. We are joining this call because no other mechanism exists to protect these operators at this stage.”
BetaKit reached out to XTM for comment on the joint statement, and whether money would be returned to former clients, but have not yet received a response.
BetaKit’s Prairies reporting is funded in part by YEGAF, a not-for-profit dedicated to amplifying business stories in Alberta.
Feature image courtesy of Unsplash.