On July 22, the former CEO of Wirecard, Markus Braun was arrested on fresh charges after prosecutors stated that they had uncovered evidence that the company used false accounting to defraud creditors of $3.7 billion.
As per several reports, the company faked two-thirds of its sales. This means that the company will never be able to repay its debt. The company owes around €3.5 billion to its creditors. Out of this debt, €1.75 billion are from 15 banks and €500 million have been issued in the form of bonds.
From the past few years, several media reports and whistleblowers alleged that Wirecard is faking its sale transactions to inflate revenue and profits. In 2019, the Financial Times published a series of investigation on the same.
Following the allegations, the company sued the Financial Times. Also, in 2019, it called KPMG, an auditor firm, to run an independent probe into the allegations.
In April 2020, KPMG after auditing revealed that cash balances of around €1 billion couldn't be verified by the company. The auditor further stated that it is unable to trace down vast sums of advances to merchants.
In June 2020, the accounting firm of Wirecard, Ernst & Young, denied to sign off the company's 2019 accounts on the ground of false information about the accounts worth €1.9 billion. Upon this, Wirecard stated that the money had been sent to two banks in the Philippines. However, the claim was refuted by both the banks and the Central Bank of the Philippines issued a statement that the company never entered into its monetary system.
On June 19, 2020, the company's CEO, Markus Braun resigned from the post, after which the company admitted of a prevailing likelihood that €1.9 billion did not exist. On June 23, 2020, the German authorities arrested Markus Braun who was later released on bail of €5 million. On June 25, 2020, the company filed for insolvency after the talks with creditors failed.
The authorities are also in search of the former chief operating officer Jan Marsalek. He is believed to have contacts with the Russian Intelligence Agencies and is hiding in Russia, as per the German Newspaper Handelsblatt.
It is one of the biggest scams of Germany since Volkswagen's Dieselgate scandal of 2015 and the Siemens corruption scam of 2000. The Wirecard scam is known as the 'Germany's Enron' as it is similar to the scam done by the US energy company 'Enron' in the year 2001.
About Wirecard
Wirecard was established in the year 1999 to offer electronic payment transaction services in all the continents. At its peak, the company's value was $28 billion. Wirecard was listed among the 30 companies on Germany's prestigious DAX stock index.
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