Wirecard says disputed €1.9bn ‘may not exist’

Beleaguered German payments fintech Wirecard has been forced to admit that €1.9bn (£1.7bn) of funds which auditors EY reported as ‘missing’ may never have existed, while its former CEO has been arrested on possible fraud charges

Public prosecutors in Munich said Wirecard’s founder and ex-CEO Markus Braun had been arrested on suspicion of inflating the company's balance sheet and revenues to make it appear stronger and more attractive for investors and customers.

Last week the company, which is listed on the Dax stock exchange, announced that EY had said that no sufficient audit evidence had been obtained relating to cash balances on trust accounts.

The sums involved represent approximately a quarter of the consolidated balance sheet total. They related to cash held by a trustee and were described by Wirecard as ‘spurious’.

In an update this week, Wirecard said founder Markus Braun had resigned with immediate effect as member of the management board. He has been replaced as CEO by James Freis.

It has now also sacked Jan Marsalek, who was Wirecard chief operating officer. He had been suspended from his role earlier this month but his contract has now been terminated.

In a statement, Wirecard said that ‘on the basis of further examination that there is a prevailing likelihood that the bank trust account balances in the amount of €1.9bn do not exist.’

Wirecard said: ‘The company previously assumed that these trust accounts have been established for the benefit of the company in connection with the so called “third party acquiring business” and has reported them as an asset in its financial accounts.

‘The foregoing also causes the company to question the previous assumptions regarding the reliability of the trustee relationships.’

It also said that previous descriptions of the third party acquiring business by the company are not correct, while there was a question mark over whether, and to what extent, such business has actually been conducted for the benefit of the company.

As a result, Wirecard has withdrawn its preliminary results for the financial year 2019, as well as the preliminary results of the first quarter of 2020, the EBITDA prognosis for the financial year 2020, and its five yearly forecast.

Wirecard also said that ‘potential effects on the annual financial accounts of previous years cannot be excluded.’

The fintech is facing a funding crisis, with bank lending due for renewal at the end of this month. It entered the Dax 30 share index two years ago, with a valuation of €24bn, but its shares have crashed in recent days, reducing this to less than €3bn.

A spokesperson for EY Germany told Accountancy Daily: 'Our audit work is ongoing and we have no further comment at this time.'

Further reading

EY reports €1.9bn ‘missing’ at Germany’s Wirecard

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