Wirecard’s Insolvency Manager Files Lawsuit Against EY in Germany

Wirecard’s insolvency manager, Michael Jaffé, filed a lawsuit in a court in Stuttgart against accountancy firm EY.

The lawsuit claims 1.5 billion euros (about $1.66 billion) in damages over EY’s role in auditing Wirecard’s books before the German payments company collapsed in 2020, Reuters reported Friday (Dec. 29).

This lawsuit is one of several that EY is currently dealing with, including an investor suit filed last week claiming over 700 million euros (about $774 million) in damages, according to the report.

Wirecard filed for insolvency in June 2020 after revealing a 1.9 billion-euro (about $2 billion) hole in its accounts, the report said. EY, the accounting firm responsible for auditing Wirecard’s financial statements, stated that the discrepancy was the result of a sophisticated global fraud.

The collapse of Wirecard, which owed creditors almost $4 billion, sent shockwaves through the German business community and raised questions about the effectiveness of regulatory oversight, the report said.

The lawsuit filed by Jaffé seeks 1.5 billion euros in damages from EY for its alleged failure to identify the fraudulent activities that led to Wirecard’s downfall, per the report.

EY has consistently denied any wrongdoing and rebuffed claims against it for damages related to Wirecard, according to the report.

Klaus Nieding, a lawyer representing shareholders in the investor suit, argued that EY should have easily identified that the alleged 1.9 billion euros did not exist in Wirecard’s corresponding accounts, the report said. He pointed out that another auditor later discovered this discrepancy quickly.

In another development regarding the company, Wirecard’s former finance chief, Burkhard Ley, was charged Dec. 14 with fraud, breach of trust, accounting and market manipulation.

Ley is one of four former Wirecard executives who were arrested in 2020 and jailed following the scandal. However, he was later released, with authorities saying they had second thoughts about keeping him in custody, as most of the wrongdoing at the company happened after his tenure.

Wirecard was valued at more than 24 billion euros (about $27 billion) at its peak before the June 2020 revelation of the non-existent corporate cash, which became one of the biggest accounting scandals in Germany’s history.