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Wirecard files for insolvency, black hole widens to $4bn

Mohit Oberoi
Author: Mohit Oberoi

Last Updated: June 25, 2020

German payments firm Wirecard filed for insolvency on Thursday as it was revealed the black hole in its accounts means it owes creditors almost $4bn.

The national fintech champion was worth $28bn after it was admitted to the DAX stock index two years ago, but now becomes the first company to the admitted to the market of Germany’s 30 largest listed firms to go bust.

Wirecard’s demise leaves creditors owed €3.5bn ($3.9bn ), a source close to talks with creditors said. Of that amount, it has borrowed €1.75bn from 15 banks and €500m from bond investors.

Shares were suspended an hour by the Frankfurt Stock Exchange before the announcement. They have now lost 98% since auditor EY refused to sign the 2019 accounts last week, forcing out long-time chief executive Markus Braun (pictured). The firm finally admitted on Monday that the money probably does not exist.

Braun was also arrested on Monday in relation to the accounting scandal, but posted €5m in bail set by a Munich court and walked free the following day.

However, the warrant against the 50-year-old Austrian has not been lifted, he remains under investigation by prosecutors who suspect him of misrepresenting Wirecard’s accounts and falsifying income.

Braun had resigned as chief executive of Wirecard on Friday and was replaced by James Freis, who joined from Deutsche Börse the day before.

The Munich prosecutor’s office, which is already investigating Braun on suspicion of misrepresenting Wirecard’s accounts and of market manipulation, said: “We will now look at all possible criminal offences.”

The firm has been fighting whistleblower allegations of accounting fraud for more than 18 months. A forensic audit by KPMG, which Wirecard’s supervisory board commissioned after the Financial Times made a series of allegations about how it documented sales, failed to allay concerns when its findings were published in April.

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Mohit Oberoi

Mohit Oberoi is a freelance finance writer based in India. he has completed his MBA with finance as majors and also holds a CFA charter. He has over 13 years of experience in financial markets. He has been writing extensively on global markets for the last six years and has written over 6,500 articles. He mainly covers metals, electric vehicles, asset managers, and other macroeconomic news. He also loves writing on personal finance and topics related to valuation.