I read through the document and it seems like it was either a Reverse Or a Flex deal that went bad. It seems like the merchants took funding that was supposed to be paid out over time and then the installment payments weren't made to them. If I had to guess, I'd say that these merchants breached their agreements by taking more funding or stopping to pay. This would generally allow the funder to stop sending the weekly disbursement or the next chunk of the flex while still collecting on the agreement...

I'm sure it's a lot more complex than the government wants to make it seem.