A team of police and investigators raided the headquarters of KfW, a German state-owned development bank, over a 100 million euro ($117 million) loan it made to Wirecard, the Financial Times (FT) reported.
Frankfurt prosecutors are investigating the loan, according to FT. A spokesperson for the lender said the company is cooperating with police and confirmed the raid occurred two weeks ago.
On Tuesday (Sept. 29), German police raided Wirecard’s headquarters on the outskirts of Munich in Aschheim as part of the same investigation, FT reported.
KfW Ipex Bank, a subsidiary, provided Wirecard with the unsecured loan two years ago and extended it last year, according to FT. After Wirecard filed for bankruptcy protection in June, KfW sold the loan to a distressed-debt investor and took an undisclosed loss.
At the center of the probe is whether the bank’s decision to provide and extend the loan may have been a breach of fiduciary duty, a spokesperson for the Frankfurt prosecutors’ office told FT.
KfW is not the only bank to issue Wirecard a loan, FT reported. Frankfurt-based Commerzbank, part of a consortium of 15 lenders who provided 1.75 billion euros ($2 billion) in credit to Wirecard, wrote off 97 percent of the loan in August, FT reported.
Also last month, three of the biggest lenders to the one-time FinTech leader have declared losses.
ING Group in the Netherlands and Commerzbank each took a hit of 175 million euros ($207 million), more than half of their profit for the second quarter. Credit Agricole, the French financial institution, suffered a loss of about 110 million euros ($130.6 million).
Wirecard, once valued at $28 billion, filed for insolvency in June after admitting that 1.9 billion euros ($2.1 billion) said to have been deposited in two Philippines banks did not exist.
Last month, reports stated that in anticipation of its collapse in June, Wirecard executives may have raided the German payment company and deposited $1 billion in partner companies while it fought allegations of accounting fraud.
The alleged theft took the form of unsecured loans. At the time, Wirecard said the loans were used to pay its partners in Dubai, Singapore and the Philippines who processed card transactions.