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Wirecard - The saga of Germany's darling tech giant and it's missing money

Updated: Jul 31, 2020

- By Archit and Gautam |

Aberrant practices often attain normalization until they produce cataclysmic consequences

The statement pretty much sums up the story of Germany’s darling tech giant- Wirecard.

Being under intense scrutiny for the past few months, the payments company finally filed for insolvency after being unable to locate €2 billion of cash - putting up a cautionary tale for investors and a grave deterrence against blunders by auditors.

Wirecard operated through a chain of TPAs (Third Party Acquirers) so as to maintain its stellar corporate personality and simultaneously, pursue its long-standing relationship with wagering and adult sites which represented a significant portion of its revenues.

According to the barter, the company was only required to share the commission with the TPA’s as their compensation. This company was hugely profitable, reporting stellar growth and increasing profits for several years. Out of these profits, half of them were attributed to the Third-party Acquirers segment.

Being the investors’ darling, Wirecard was supported by reputed analysts and investors. Additionally, it had marquee investors such as Softbank in its fold. All this seemed too good to be true and soon whistle-blower complaints started pouring in. With some very aggressive posturing, Wirecard was able to fend off most of these complaints but then a series of Investigative stories by the Financial Times(FT) was finally able to uncover what was going to be one of the largest accounting frauds in Germany’s history.

To expand its business further in Asia, Wirecard's Asia Pacific group was entrusted with convincing Hong Kong Monetary Authority officers to give a permit that would empower them to dispense prepaid bank cards in the district. However, the application was declined because of their limited presence in the region. The business had made a little and simple plan i.e. to cook its books. They moved assets from their parent organization through a progression of dark exchanges and showed that those assets were being paid by an outside client to their Asian subsidiaries to portray it as authentic income.

For example, ConePay International, one of the Wirecard’s TPAs created millions in income for Wirecard's Singapore business. However, when FT journalists visited the organization’s address, they found an ex-sailor living there. Instead of verifying these claims, the German financial regulator, BaFin sued the FT lead columnist on the charges of market manipulation and securities fraud.

In 2019, Wirecard’s Singapore office was charged with fraud, forgery, and money laundering by Singapore’s monetary authority. This solidified the claims of FT journalists and the whistle-blower complaints started increasing rapidly. Eventually, the organization had to employ KPMG for an independent audit, which in April 2020 charged Wirecard, of not giving them access to numerous records.

In June 2020, the organization’s auditor made a declaration, saying it couldn’t locate the missing sum of €2 billion. Furthermore, it was discovered that the money never truly existed and Wirecard finally admitted to Accounting fraud. The fiasco had at last unfurled and the star CEO Markus Braun along with other key managerial personnel were arrested and Wirecard, at last, filed for bankruptcy.


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