Security & Fraud

Wirecard's Missing Cash Brings Accounting Saga To New (Perhaps Final) Chapter 


Cash, they say, is king.  And when cash disappears from the bank (and thus from corporate coffers) — under mysterious circumstances with a convoluted backstory — investors panic.

Heads roll in the C-Suite.

For Wirecard, the German payments FinTech, call it the case of the missing $2 billion.

News came on Friday (June 19) that the FinTech’s CEO resigned in the wake of disclosures by two banks in the Philippines that $2 billion reportedly being held for the firm simply wasn’t there. And, in fact, that $2 billion had never been there in the first place.

As recounted by The Wall Street Journal, CEO Markus Braun has left the firm, and James H. Freis is the interim CEO, effective immediately. In addition,  the COO, Jan Marsalek, has been suspended.

That corporate shuffling came after an announcement Thursday that 2019 financial results and disclosures would be delayed, because its auditor had refused to certify results. The auditor, EY, said it had been deceived over more than $2 billion that had been reported to have been held by Wirecard. Documentation tied to those billions of dollars — the $2 billion that the Philippine banks subsequently said that they did not have — were deemed to be fraudulent.

“The document claiming the existence of a Wirecard account with BDO is a falsified document and carries forged signatures of bank officers,” a BDO Unibank Inc. spokesperson told the WSJ.

Drilling down a bit, the billions of dollars in question — and nowhere to be seen — were supposedly tied to accounts to be looked after by  a trustee. And this is not the first time those accounts were called into question, it seems. Back in October, Wirecard had appointed KPMG as an outside auditor to look into allegations over accounting practices. KPMG said in an April 2020 report that it had, according to the Journal, “problems” gaining insight into those balances.

Now, perhaps predictably, come the threats of legal action. As detailed in the Financial Times, key investors Union Investment and DWS, an asset management firm, have said they were considering suing the company.

Former CEO Braun has stated that “it cannot be ruled out that Wirecard has become the aggrieved party in a fraud of considerable proportions.” That statement implies the company itself has been duped. As the tale unspools, there have been some allegations of fraud in the past. As had been reported over the last year and a half, there were reports that the firm’s Singapore office had forged documents that were in turn used to inflate revenue figures, according to CNBC. Other reports later in the year said that sales were boosted at the company’s units in Dubai and Dublin.

At this writing, Wirecard shares have lost about 80 percent of their value. And in what might be the final reckoning for the company, a slew of lenders — including, as Bloomberg reported, 15 commercial banks — “are in hectic negotiations” to navigate default risks. Wirecard has said that its loans of roughly 2 billion euros could be “terminated” if the audited 2019 results are not published Friday. If there is a default, if the banks cannot work terms out, the ripple effects could be significant as Wirecard would be pushed into insolvency and the banks themselves would have to write down those holdings.

For Wirecard, it’s a high-wire balancing act — with no safety net below.



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