XTM: the chargebacks were paid with other merchants' money

The EveryDay Platform sat between hospitality employers and their staff: merchants put money in, and the platform loaded workers' cards with it. XTM Inc. traded on the CSE under the ticker PAID.

By September 30, 2025, the applicants had accumulated a deficit against merchant funds of approximately $18.75 million — what the monitor calls the Shortfall, per Second Supplement to the Third Report of the Monitor, June 11, 2026, para. 19.

What follows is the monitor's account, given in reply evidence on a contested motion that has not yet been heard.

The reset

In the autumn of 2025, to reduce costs and address the Shortfall, the applicants partnered with EPFC and transitioned XTM's payment service provider obligations and compliance requirements across to it.

Part of that arrangement is the detail that matters. XTM transferred exclusive authority to EPFC to give instructions to XTM's banker, DC Bank, in respect of the accounts used to operate the platform, per Second Supplement, June 11, 2026, para. 20.

Then, on or about January 27, 2026 — the Reset Date — EPFC, without notice to XTM, reset the merchant ledger balances, sometimes called wallet balances, to reflect the effect of the Shortfall. There was no cash held at that time, per Second Supplement, June 11, 2026, para. 21.

A merchant logging in on January 28 saw a different number than it had seen the day before, and nobody at the company it had contracted with had been told the change was coming.

The monitor's reply to the merchants' evidence is a single line, and it is the heart of the dispute: as of the Reset Date, there was no cash to support the merchant ledger balances, per Second Supplement, June 11, 2026, para. 22.

Din Tai Fung's affidavit puts the merchants' objection precisely. It intends to "dispute the legal basis on which the wallet was 'reset'", saying it is unclear from the materials how the books, records, merchant ledger entries, rejected pre-authorised debits, chargebacks and other adjustments were reconciled to reach the conclusion about what was actually in its wallet, per Second Supplement, June 11, 2026, para. 18.

That question — on what authority was the balance rewritten, and does the arithmetic hold — is unresolved and is going to a hearing.

Why the platform kept running

A payments business with no cash behind its customer balances did not stop. It borrowed.

XTM and EPFC were able to keep the platform operating for a time by using funds borrowed from Pateno, as disclosed in XTM's financial statements — short-term borrowing to make up the Shortfall and support operations, per Second Supplement, June 11, 2026, para. 23.

What made that credit-based model untenable, on the monitor's account, was an increase in chargebacks initiated by merchants beginning in or about January 2026 — while those same merchants continued using the platform, per Second Supplement, June 11, 2026, para. 24.

And then the sentence that explains why the monitor is chasing restaurants rather than writing this off:

To be clear, as there was limited cash backing the Merchant "wallets", these chargebacks were satisfied by drawing on funds in XTM's settlement or "Landing" account which were submitted by and should have been available to other Merchants.

A chargeback in these circumstances is not a merchant recovering its own money. It is a merchant recovering money — from a pooled account into which other merchants had paid, and against balances that had no cash behind them. The first movers were made whole out of the float belonging to everyone who had not yet moved.

That is the ordinary rationale for a stay of proceedings, arriving through the payment networks rather than through a sheriff. A stay exists so that the estate is distributed by rule instead of by reflex, and the merchants who did not initiate a chargeback are the constituency it was protecting.

"It was the bank's money"

Din Tai Fung's answer is technically precise and worth understanding, because it is the argument any merchant in this position would make.

Its claim, it says, was processed by Bank of America and returned to it using the bank's "own funds" in early March 2026. On that account, nothing was taken from XTM at all — a card network participant paid its customer out of its own pocket.

The monitor's reply does not dispute the mechanics; it says the assertion remains to be proven, and then follows the money one step further. Even if true, DTF's remedy had an effect on the business and property of XTM that was felt after the date of the Initial Order, because Bank of America then recovered its own funds through the inter-bank clearing system, per Second Supplement, June 11, 2026, para. 25.