German Giant Wirecard Filed for Insolvency, Some $2.1 Billion Funds Missing from Books

Wirecard missing some $2.1 billion from its books, files for insolvency. Wirecard’s auditor, EY says that the company is involved in a multiyear sophisticated fraud.

Germany’s Payment Processor Wirecard Involved in a Financial Scandal, $2.1 Billion Missing From Books

The financial and payment processor Wirecard was involved in a multiyear fraud scandal that led to the company filing for insolvency. As the scandal unravels, it was made clear that some $2.1 billion (€1.9 billion) were not found in the books of the German company.

The announcement of the insolvency came last week on Thursday morning. But it wasn’t long before response from Ernst & Young (EY), which is the company’s auditor, came. According to EY it was obvious that there is: “an elaborate and sophisticated fraud involving multiple parties around the world“. With that being said, on Monday Markus Braun, who is the founder and former chief executive, was arrested. He was accused of market manipulation as well as untrue accounting. On Tuesday, Braun was released on a $5.7 million (€5 million) bail.

The current scandal, initiated due to the missing funds, has resulted in the company’s shares plummeting but customer accounts may also be frozen. Furthermore, the company has loans of some $1.5 billion (€1.3 billion) which might as well be left outstanding. In a possible worst-case scenario, Wirecard may disappear from the financial market.

Gambling Industry Affected by the Financial Scandal

Wirecard AG is a German company founded in 1999. The company processed payments and also offered financial services. Wirecard is actually listed on the Frankfurt Stock Exchange and it’s a part of the DAX index. Back in 2002, Markus Braun was appointed as CEO. Under his control, the company focused around online payment services mainly for the gambling industry. Because of the most recent scandal, many online gamblers that used the services of Wirecard may be left with frozen accounts. With that being said, those gamblers will not be able to deposit or withdraw their funds from their gaming accounts.

This is actually far from the first scandal Wirecard was involved in. Looking back in January 2019, the Financial Times reported that a senior executive by Wirecard allegedly forged and backdated contracts for company transactions in Singapore. However, the company disagreed and sued the news outlet on accusations about market manipulation.

Due to this, Wirecard’s stocks took a nose dive. Later on, in September 2019, another scandal emerged. The Financial Times has released accounting spreadsheets, which allegedly belonged to Wirecard. In response, the company asked for the auditor KPMG to perform independent audit. Then in March 2020, Wirecard said that the auditor found nothing wrong. However, in April, KPMG announced that Wirecard did not provide sufficient details necessary to reject the allegations of the news outlet Financial Times. With that being said, the company shares plunged once again.

Focusing on more recent events, Wirecard’s auditor EY has seen a lawsuit by investors. The lawsuit was filed by Wolfgang Schirp who commented on the subject by saying: “It is frightening how long Wirecard AG was able to operate without being objected to by the auditors.” Word from Marabaud Group analyst Neil Campling was also heard. Campling told Bloomberg: “Ernst & Young bear responsibility for this.” He also found amazing how EY signed off the 2018 account of Wirecard.