FCA blocks Wirecard as Brussels eyes German regulation

Wirecard HQ in Aschheim near Munich southern Germany

Auditors KPMG said in a review published in April it was unable to verify 1 billion euros ($1.1bn) in cash balances, questioned Wirecard's acquisition accounting and said it could not trace hundreds of millions of euros in cash advances to merchants.

The Munich based firm, which employs nearly 6,000 staff in 26 countries, initially claimed the money was held in accounts at two banks in the Philippines.

BaFin could not immediately be reached for comment on Friday.

Then on Monday 22 June 2020, the company said that "there is a prevailing likelihood that the bank trust account balances in the amount of 1.9 billion Euro do not exist".

FRANKFURT, June 26 ― Wirecard collapsed yesterday owing creditors nearly US$4 billion (RM17.1 billion) after disclosing a gaping hole in its books that its auditor EY said was the result of a sophisticated global fraud.

BaFin banned short-selling of Wirecard's shares for two months in February as concerns mounted about the reliability of its accounts.

At one point, prosecutors in Munich even launched an investigation against one of the FT's journalists. The move comes days after CEO Markus Braun's resignation and the company's admission that the missing €1.9 billion (around $2.1 billion) probably "does not exist".

"After EY's auditors refused to sign the group's financial statements a week ago, it became clear at the beginning of this week: Wirecard's rise, the company's success story crowned by its entry into the German Dax share index, was largely based on lies and was presumably a big fraud". Braun was later released on a €5 million ($5.6 million) bail.

"These developments may make the business unsustainable", its analysts wrote in a note.

The contract, with hydraulics and piping company Flexi Flex, appeared to have been secured and signed without the knowledge, consent or input of any of Wirecard's lawyers, sales team or technology staff, yet indicated Wirecard was doing millions in business with Flexi Flex.

Braun has been charged with false accounting and market manipulation to woo Wirecard's investors and clients.

The most recent one, which now pushed the company towards insolvency, came last week when Ernst and Young revealed that €1.9 billion ($2.1 billion) in cash went missing.

The insolvency precedes followed the suspension of the trading of the company's shares on the Frankfurt Stock Exchange.

The insolvency filing did not include its Wirecard Bank subsidiary, which holds an estimated €1.4 billion in deposits and is already under emergency management by BaFin.

The insolvency proceedings now leave Wirecard's creditors facing lengthy negotiations with court-appointed administrators over how much they'll get back out of the money they're owed.