Wirecard Was Germany’s Fintech Star—Now $2 Billion Is Missing And Its CEO Has Been Arrested

TOPLINE

Ex-Wirecard CEO Markus Braun, who resigned last week amid allegations of fraud at the German payment processing company, was arrested Tuesday on suspicion of using fake transactions to inflate the company’s sales and balance sheet to boost its profile with investors.

KEY FACTS

News peg

Braun’s arrest is the crescendo in a long-running battle that has pitched the Munich-based company, and Germany’s financial regulator against a small-army of short-sellers, and the Financial Times.

Short sellers had circled the company for years but a FT investigation that alleged unusual transactions and forged contracts at Wirecard’s Singapore office prompted authorities there to investigate, and its shares to drop. The FT followed up with allegations sales and profits at the company’s outpost in Dubai and Ireland were inflated with Wirecard firing back with the threat of a lawsuit, while Germany’s financial regulator opened a probe into the FT journalists involved in the story.

Key background

Braun founded Wirecard, once a star of Germany’s startup landscape, in 1999 and it has since expanded around the world, employing almost 6,000 people. Wirecard’s growth led it to joining the exclusive club of 30 major Germany companies tracked by the DAX index in 2018. The search for the missing cash came after auditors EY flagged a massive hole in the company’s balance sheet last week, which represents around a quarter of Wirecard’s assets, and delayed signing off on the firm’s 2019 accounts. But the hunt came up short after two banks in the Philippines accused of holding the cash denied having Wirecard as a client, adding that the billions never entered the nation’s financial system, officials said on Sunday. They also accused Wirecard of using the banks’ names to cover the company’s own tracks.

Big number

The company’s valuation has plummeted from more than $28 billion two years ago, to just over $3 billion last week.

What to watch for

Braun is set for a court hearing on Tuesday. Meanwhile, prosecutors are reportedly mulling an arrest warrant for former board member Jan Marsalek, who was also fired as the company’s chief operating officer. Marsalek was the executive who oversaw operations including in Southeast Asia.

Further reading

Fraud Allegations Rock Tech Company Wirecard—Billionaire CEO Earned Millions (Forbes)

Payment Processor Wirecard Cannot Locate $2.1 Billion, CEO/Founder Out (Forbes)