Wirecard has long been the most prominent fintech company in Europe. When it launched in 1999, the German start-up was a small payment processor for pornographic and gambling sites.
Despite some suspicions of irregularities, the company flourished in the 2010s. In 2018, Wirecard is valued at more than 24 billion euros [21,4 milliards d’euros] and has hundreds of thousands of customers around the world, including large multinationals.
But the same year, the trouble began for the company: the Financial Times published a series of surveys that detail its questionable accounting practices and the suspicions of fraud hanging over it.
Wirecard defends himself and sues the newspaper, accusing it of wanting to influence the market against it. She even manages to convince the German Federal Financial Supervisory Authority (BaFin) to investigate the journalists responsible for the articles in question.
Ghost cash
In mid-June 2020, everything collapses. Supposed to hold 1.9 billion euros belonging to Wirecard, two Filipino banks inform EY (formerly Ernst & Young), the firm responsible for auditing the company, that they have never seen the color. EY therefore decides not to certify its 2019 financial year.
On the stock market, Wirecard begins a free fall. However, this is only the beginning of the nightmare: on June 18, the company admits that the sums concerned “disappeared”. The next day, its CEO Markus Braun resigned.
On June 22, Wirecard acknowledges that money has not gone away but, perhaps stranger still, that it “Probably does not exist”. On the 23rd, Braun was arrested and released on bail of 5 million euros.
Wirecard ends up filing for bankruptcy on June 25: in a short week, the company’s stock plunged by around 90% on the markets, and its customers abandoned it.
The business does not stop there, however. Although the investigation is far from over, the question of German regulation of companies is already being asked. Because in addition to investigating journalists from the Financial Times, the BaFin had in 2018 prohibited traders to bet on a decline in the price of Wirecard.
The institution assures today that its decision was intended to protect the market and not the company, and that only the banking part of Wirecard, and not the whole of society, was targeted.
It remains to be seen whether these justifications will be enough to convince the German Minister of Finance and the European Commission, who announced that he had asked the European Securities and Markets Authority (ESMA) to launch its own investigation.
For its part, EY accuses Wirecard of a “Elaborate and sophisticated fraud”. Philippine authorities have also indicated that one of the company’s former senior executives, Jan Marsalek, allegedly transited through their country in June, before flying to China. Affected by an arrest warrant issued by German justice, he plans to go to the Munich prosecutor in a few days.
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