ENRON 2.0
Wirecard committed 'elaborate and sophisticated fraud' say auditors

The auditors of Wirecard have accused it of committing an "elaborate and sophisticated fraud." The German payments provider has filed for insolvency and its CEO has been arrested.



Auditing company EY accused Wirecard of committing an "elaborate and sophisticated fraud" in comments on Thursday.

It came soon after the scandal-hit German payments provider filed for insolvency and its CEO was arrested.

"There are clear indications that this was an elaborate and sophisticated fraud involving multiple parties around the world in different institutions with a deliberate aim of deception," EY said.

German Finance Minister Olaf Scholz said on Thursday that Wirecard's debacle "must be a wake-up call that we need more oversight, more controls" over financial firms.

"The scandal is unparalleled in the financial world," Scholz added. Read more: Former Wirecard CEO Markus Braun arrested

Missing billions

EY had previously sounded the alarm during the audit of the 2019 financial statement, which showed that the firm could not account for €1.9 billion ($2.1 billion).

The €1.9 billion was supposed to have been held by two banks in the Philippines. But earlier this week the country's central bank confirmed that the money had not entered its financial system.

CEO Markus Braun was subsequently detained on suspicion of inflating the company's balance sheet and revenues to make it appear stronger and more attractive for investors and customers.

Three other managers are also under investigation.

'The moneys gone'

Wirecard's creditors have little hope of recovering some €3.5 billion euros that the firm owes, sources familiar with the matter told Reuters news agency.

"The money's gone," one banker said. "We may recoup a few euros in a couple of years but will write off the loan now."

Things also looked grim for shareholders. Wirecard shares have lost 98% of their value since EY refused to sign off on the firm's financial statement last Thursday.

German law firm Schirp & Partner told Reuters that it planned to file class actions against EY on behalf of shareholders and bondholders, now that Wirecard had gone bust.

"It is frightening how long Wirecard AG was able to operate without being objected to by the auditors," partner Wolfgang Schirp said.

Wirecard's fall from grace began last year, when a series of reports in British newspaper Financial Times uncovered accounting irregularities in its Asian operations.

Founded in 1999, the Munich-based had come to edge traditional lender Commerzbank out of the DAX 30 index and was once heralded for its innovation.

Germanys Economy Minister Peter Altmaier has called for a thorough investigation, warning that the Wirecard scandal could erode confidence in the country's finance sector.

jcg/aw (Reuters, AFP, AP, dpa)


Wirecard files for insolvency after financial hole laid bare
The German payment company Wirecard has said it will open insolvency proceedings after disclosing more than $2 billion dollars missing in its accounts. Trade on shares in the company was suspended.



German financial technology firm Wirecard announced Thursday it would file for insolvency amid an accounting scandal that led earlier this week to the arrest of its former CEO.

The company said it was making the filing "due to impending insolvency and debt." It will make the filing at a district court in Munich.

Read more: Scandal-hit German fintech Wirecard secures $1 billion investment

Markus Braun resigned as CEO on Friday after the company could not find roughly €1.9 billion ($2.1 billion) that appeared in its accounts. Braun later turned himself in to prosecutors after Wirecard concluded that the money probably never existed.

Trading in the group's shares was immediately halted by the Frankfurt Stock Exchange, leaving them blocked at €10.74, down 12.7% from close of trading Wednesday. Prior to the sudden scandal, it was trading just over €100.

Wirecard has become the first member of DAX, Germany's blue-chip share index, to go out of business.

The Munich prosecutor's office, which is already investigating Braun on suspicion of manipulating Wirecard"s accounts, said "We will now look at all possible criminal offenses."

Following his arrest, Braun has been released on bail.

How did Wirecard become insolvent?

Wirecard had been one of Germany's fastest-growing tech firms and was set to be a new giant in the business. The scandal has also raised questions about Germany's ability to implement corporate regulations.

Media reports in 2019 questioned the company’s accounting, but Germany's financial regulator, BaFin, targeted investors instead of the firm itself.

BaFin has described events this week surrounding Wirecard as a "disaster" but also said that it stands by its decisions.

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.

ed/msh (AP, dpa)

SEE 
https://plawiuk.blogspot.com/2020/06/wirecard-fights-for-survival-as.html

https://plawiuk.blogspot.com/2020/06/fraud-wirecard-shares-plunge-after.html