Wirecard - The 1.9 Billion Euros ‘That Probably Never Existed’
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Wirecard - The 1.9 Billion Euros ‘That Probably Never Existed’

Imagine having so much money, you could lose 1.9 billion euros and not realise. It was simply ‘set aside’ for risk management in two Asian banks, for a rainy day. Except it wasn’t. 

So the story goes, the money had been set aside in two banks in the Philippines, but last weekend (21st June), the central bank of the Phillippines, confirmed that none of the money appears to have entered the country’s financial system at any given point.

Last week, as a consequence, we saw the departure of Wirecard chief executive Markus Braun. No surprise, EY refused to sign off its 2019 accounts over the missing funds.
Forbes and the Wall Street Journal reported that the auditor’s reservations related to the validity of letters that purported to show the existence of the funds in accounts at the banks. These letters were later confirmed to be fraudulent.

On the back of this, Wirecard withdrew all financial results for 2019 and Q1 2020. Worse news followed, with the statement:
“The Management Board of Wirecard assesses on the basis of further examination that there is a prevailing likelihood that the bank trust account balances in the amount of 1.9 billion euro do not exist.”

When Wirecard joined the DAX 30 share index two years ago, it was valued at 24 billion euros. Since withdrawing the financial guidance, its shares have fallen 90%.


So where did it go?

Allegations of fraud, reported by whistleblowers, have plagued the company for some time. The FT has been running a long investigation into the accounting practices of the company, for the last four years, specifically focussed on the use of funds set aside for the ‘third-party acquiring’ business, and how it accounted for these.

The crisis for the company deepened on Tuesday (23rd), when its former CEO was arrested on suspicion of fraud, by German prosecutors on suspicion on ‘false accounting and manipulative business practices’. Philippian authorities are also looking for his number two, COO, Jan Marsalek.

The president of the German financial watchdog BaFin Felix Hufeld has described the scandal as “a complete disaster” and as a “shame” for Germany generally.

With the situation changing almost daily, we now wait to see what the next steps are. The company is now scrambling to restructure itself to survive, and has named Chief Compliance Officer, James Freis, as interim CEO. In the latest twist to the tale, today (Thursday 25th June), its shares were suspended by the Frankfurt Stock Exchange, and the company filed for insolvency.

Graydon has extensive expertise in identifying out-of-the-ordinary filing patterns. Our tool, Graydon Xseptions, highlights suspicious and potentially fraudulent company activities, from multiple director resignations, filing anomalies, and duplicate accounts. Since 2005, it has analysed 2.5 billion data elements, processed 20 million sets of financial accounts, and saved clients a total of £250m in potential fraud losses.

If you’d like to know more, I’d love to show you the power of Xseptions, simply email me: Charlie.risley@graydon.co.uk and let’s book a time to suit you.

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