A lawsuit filed by a former executive of XTM Inc., a Toronto-based fintech company, has revealed serious allegations of financial misconduct, including misleading investors and a potential mishandling of customer funds. Jason Giagrande, who served as the company’s head of business strategy for the U.S. in 2022, claims he was dismissed after raising concerns about the company’s practices. This troubling situation comes as investigations are underway regarding millions of dollars in missing tips from Canadian restaurants using XTM’s digital wallet service.
Allegations Against XTM’s Leadership
In court documents lodged in the United States District Court for the Southern District of New York in September 2024, Giagrande accuses XTM’s CEO, Marilyn Schaffer, of a series of unethical activities. He alleges that she artificially inflated the company’s revenue figures presented to investors, engaged in wash trading—a method of market manipulation—and failed to provide adequate insurance for client funds.
The lawsuit claims that Giagrande warned Schaffer that the company’s non-compliance with financial regulations would eventually lead to significant issues. He further contends that XTM misled its users by not safeguarding their money adequately. Giagrande’s allegations suggest a deepening crisis within the company, which has already faced scrutiny over its financial practices.
Investigations Into Missing Tips
The situation has escalated as the Bank of Canada and the British Columbia RCMP are currently investigating complaints from restaurant owners about missing gratuities from the Everyday Payments platform, which XTM co-owns. Reports indicate that numerous restaurants across British Columbia, Alberta, Ontario, and Nova Scotia have flagged discrepancies in their digital wallets, leading to an estimated multimillion-dollar loss.
Ian Tostenson, the president and CEO of the British Columbia Restaurant and Foodservices Association, revealed that he has received complaints from at least 50 establishments regarding missing funds. The Everyday Payments service, designed to streamline the process of distributing tips to staff, has come under fire as restaurants deposit money into a digital wallet intended to hold the funds in trust until employees withdraw them.
Company Response and Financial Struggles
In response to these allegations, XTM has categorically denied Giagrande’s claims and filed a counterclaim, asserting that he improperly profited while failing to meet his contractual obligations. The company reported a staggering “trust deficit” of approximately $18.75 million in its financial statements for the period ending September 30, 2024, raising further concerns about its financial health.
Schaffer issued a statement attributing the company’s financial difficulties to various factors, including operational costs and banking expenses. She mentioned that XTM has initiated remediation measures, such as restructuring operations and a management services agreement with Everyday People Financial Corp., to rectify the situation.
Dispute Over Revenue Misrepresentation
Giagrande’s lawsuit also alleges that Schaffer misrepresented the company’s financial standing by overstating its revenue by $20 million based on an acquisition that never materialised. When Giagrande confronted her regarding these discrepancies, he claims she dismissed his concerns with the remark, “Don’t let the facts ruin a good story.” He also expressed worries about inadequate insurance coverage for client accounts, which is mandated by Canadian law.
Despite these serious allegations, XTM maintains that Giagrande was not a significant contributor to the company’s business growth and asserts that his claims are those of a disgruntled former consultant. The case is now before U.S. courts, and both parties have indicated their intention to contest the allegations vigorously.
Why it Matters
The unfolding drama at XTM Inc. raises significant questions about corporate governance and accountability in the fintech sector. As investigations continue into the alleged mishandling of restaurant tips, the potential impact on stakeholders—including employees, investors, and clients—could be profound. The allegations not only threaten the company’s reputation but could also trigger broader scrutiny of financial practices across the industry, highlighting the need for transparency and regulatory compliance in an increasingly digital financial landscape.
