Wirecard CEO, Markus Braun, Faces Embezzlement ChargesJuly 2, 2020
It is alarming that $2 billion has disappeared in Europe’s most praised tech company, the Wirecard. If the money is not recovered rapidly, the digital payments firm may lose its financial standing.
Funds for any tech giant ensures the company stays afloat as well as deliver its day to day targets. Wirecard is no different and that is why, when the company couldn’t account for the missing cash to the tune of $2 billion, investigations were launched.
Investors reacted by pushing the shares down when the CEO resigned, and the auditors couldn’t account for the missing funds. Questions arose when the company did not publish its 2019 financial results.
Founded in 1999, Wirecard boasts of around 6000 employees and operates in 26 countries globally. The company was once appraised as a promising tech firm and recorded a $2 billion revenue in 2018, four times the income for the year 2013. The tech giant deals in processing customer payments as well as payments for their businesses. It also engages in selling analytic data services to help organizations make business-informed decisions.
The CEO resigned amidst the fraud charges and, in his letter, wrote, “The reliance of the capital market has been deeply shaken. With my decision, I respect the fact that responsibility for all business transaction lies with the CEO.” Braun, in a video statement, added that “It cannot be ruled out that Wirecard has become the aggrieved party in the case of the fraud.” The Chief Executive Officer added that he did not want to encumber the company during this crisis; hence, he resigned.
In September 2018, the tech firm recorded shares of up to 119 Euros ($213) compared to alarming share value of 25.22 Euros ($28.88), the amount that the company closed on Friday. In the same month, the company replaced the Commerzbank in Germany’s top 30 companies at a value of 24 billion Euros ($26.9 billion). As of Friday, the company was at a value of 3.2 billion Euros ($3.6 billion).
Wirecard faces scrutiny for the second time, the first being in January 2019, when the company was accused of fraud by short-sellers and its accounting practices.
The first blow in 2019, the Financial Times reported that the company was involved in forging and backdating contracts in Singapore. The next month, Singapore authorities said they would investigate. The next blow landed late last year when Wirecard outlets in Dubai and Ireland reported sales price inflation, and the company denied. An investigation done by KPMG was incomplete as the audit firm found the company did not give enough information to address issues raised by the Financial Times.
The Missing Funds
London Capital Group’s head of Research, Jasper Lawler, stated that without a very clear outline of the usage of funds, the tech giant might be headed to zero.
Braun suggested that the tech firm might be the victim of fraud concerning the missing 1.9 billion Euros ($2.1 billion) as the auditors from EY could not locate the funds, in the company’s accounts.
In a press statement, the firm said that they have information indicating falsified balance confirmations provided in relation to the accounts.
As the company struggles with the fraud charges and keep creditors away, it might be very challenging without the funds. In Germany, the scandal is raising questions about the competence of the Federal Financial Supervisory Authority.
The tech firm said that it was holding promising discussions with its lenders regarding the continuation of the cash flow and continue to nurture their business relationship.
Speaking on Twitter, Fabio De Masi, a member of the German parliament stated that a small percentage of the investors were suffering and the regulations body had to change its approach.
As the regulating body is actively investigating Wirecard, it added that it was examining Wirecard’s disclosure from the previous day as part of their investigation into whether the company broke any rules against merchandise manipulation.