Wirecard: Scandal-hit firm files for insolvency

Daniel Fowler
June 25, 2020

German fintech group Wirecard AG has filed for insolvency days after its CEO Markus Braun resigned and was arrested in relation to alleged market manipulation and false accounting.

Wirecard had been a member of the DAX index for less than two years and at its peak was worth €25 billion ($28 billion) by market capitaliztion. In the absence of an agreement with the lenders, there was a likelihood of termination and expiry of loans with a volume of Euro 800 million on June 30, 2020, and Euro 500 million on July 1, 2020.

Guevarra said he has instructed the National Bureau of Investigation to work with the anti-money laundering council to investigate the case.

The collapse of Wirecard, once one of the hottest financial technology companies in Europe, dwarfs other German corporate failures.

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But the company's shares have crashed nearly 100% in the last week, giving it a stock market valuation of less than €400m. Auditor EY refused to sign off on the company's annual report.

Rather than investigate Wirecard, it targeted investors, banning them from betting on a drop in the share price, which plunged more than 40%.

In a statement on Thursday, the firm said its new management had chose to apply for insolvency at a Munich court "due to impending insolvency and over-indebtedness".

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It was also evaluating whether to file for insolvency proceedings for its subsidiaries.

"There is no way that they could repay their total debt of 3.5 billion euros with that core, notwithstanding all the legal challenges ahead of them", the source said on condition of anonymity.

How did Wirecard become insolvent?

The ascent of Wirecard, which was founded in 1999 and is based in a Munich suburb, was dogged by allegations from whistleblowers, reporters and speculators that its revenue and profits had been pumped up through fake transactions.

The company has since admitted that $2.1 billion it declared on trustee accounts at two banks in the Philippines probably did not exist.

Braun has suggested that Wirecard may itself be the victim of fraud.

Braun has been freed on bail of 5 million euros ($5.6m) and remains a suspect. Its chief operating officer Jan Marsalek is fired.

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