SoftBank plans to sue EY over Wirecard scandal - Der Spiegel

Daniel Fowler
June 27, 2020

CEO Markus Braun was arrested on Monday.

He is now out on a bail after making a deposit of €5 million ($5.61 million).

In factuality, the ongoing ruckus over the German payments firm had been brought into light later last week after its auditor had declined to sign off the fintech firm's 2019 balance sheet over missing €2 billion.

Shares in Wirecard, which made the list of Germany's top 30 companies in 2018, have plummeted, losing nearly all of their value.

New CEO James Freis, a former financial investigator at the U.S. Treasury and compliance chief at the Frankfurt Stock Exchange, is holding crisis talks with a consortium of 15 banks led by Germany's Commerzbank.

"After EY's auditors refused to sign the group's financial statements a week ago, it became clear at the beginning of this week: Wirecard's rise, the company's success story crowned by its entry into the German Dax share index, was largely based on lies and was presumably a very big fraud". This might impact a large number of firms as its services were used by many customer-faced payment providers.

The insolvency proceedings now leave Wirecard's creditors facing lengthy negotiations with court-appointed administrators over how much they'll get back out of the money they're owed.

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Wirecard's implosion on Thursday, owing creditors nearly $4bn, is shaping up to be one of Germany's biggest corporate scandals, and regulator BaFin has come under fire at home and overseas for not spotting problems sooner.

Wirecard Bank holds 1.4 billion euros, according to the most recent figures, on behalf of depositors whose claims would senior to those of bank lenders to parent company.

Germany's state-owned development bank KfW is facing potential losses of €100 million (US$112 million or RM481.42 million) after payment company Wirecard AG filed for insolvency on Thursday.

"Today is a complete vindication for those that exposed the fraud", said Fraser Perring, who bet on a fall in Wirecard's shares and co-authored a 2016 report that alleged fraud.

Banking supervision chief Felix Hufeld has admitted that the watchdog Bafin "had not been effective enough to prevent something like this from happening". Each time, Wirecard argued the charges were attempts to tank its shareprice by jealous, predatory competitors, triggering investigations by German market regulator BaFin, which invariably found in the company's favour.

The Munich prosecutor's office, which is investigating Braun on suspicion of misrepresenting Wirecard's accounts and of market manipulation, said: "We will now look at all possible criminal offences".

Wirecard's former chief operating officer Jan Marsalek, who was sacked last week, is believed to have flown to China from the Philippines on 24 June, CNN Philippines reported.

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