Wirecard Scandal – in 30 seconds

Wirecard is a large Germany-headquartered fintech, that has this week filed for insolvency and whose CEO has been arrested after the firm reported EUR 1.9 billion as missing. The company has since announced that this EUR 1.9 billion likely does not exist.

Wirecard is one of the world’s largest fintech firms and this potential fraud is likely to have a long-lasting impact on the regulation of fintech firms around the world. The UK’s Financial Conduct Authority has already announced they are looking into possible new requirements for fintech firms.

  • Wirecard AG was founded in 1999.
  • Provides payment services around the world – including issuing debt and credit cards (for itself and for its clients).
  • 5,300 employees (as of June 2019).
  • Headquartered in Munich, Germany.
  • Subsidiaries in the UK, the US, Singapore, Hong Kong, Indonesia, Austria, Turkey, Romania, Malaysia, India, Brazil, Australia, Turkey, South Africa, New Zealand, the UAE and Ireland.
  • Wirecard provides payment services – directly to customers and to other fintech firms.
    • Part of the worry here is that given the number of fintech firms that are Wirecard’s customers, there is asystemic risk if Wirecard collapses and funds are missing.
  • Timeline of recent events:
    • 2019 – Wirecard hired KPMG to conduct an independent audit to investigate fraudulent accounting allegations made by the Financial Times in January 2019 (explained more below). Wirecard’s main auditor is EY.
    • March 2020 – Wirecard announces the KPMG audit found no discrepancies.
    • April 2020 – KPMG announces that it did not receive enough documentation to be able to address all the alleged accounting regularities.
    • 5 June 2020 – Police search Wirecard’s headquarters to investigate potentially misleading statements made by Wirecard’s management.
    • 18 June 2020 – Wirecard announces EUR 1.9 billion of “missing” cash (which Wirecard had previously reported as being in two banks in the Philippines).,
    • 19 June 2020 – Wirecard CEO (Markus Braun) resigns.
    • 22 June 2020 – Markus Braun is arrested by German police.
    • 25 June 2020 – Wirecard files for insolvency.
    • 26 June 2020 – the UK Financial Conduct Authority orders Wirecard’s UK authority to freeze all customers’ accounts.
  • A SoftBank fund invested EUR 900 million in Wirecard in 2019.
  • In January 2019, the Financial Times had reported suspected falsification of accounts and money laundering at Wirecard. Wirecard at the time said this was “fake, misleading and defamatory”. Wirecard also filed lawsuits against the Financial Times for unethical reporting and market manipulation.
    • Munich’s public prosector also started a criminal investigation against the Financial Times journalist.
    • The German financial supervisor (BaFin) banned short selling Wirecard shares from 18th February 2019 (until 18th April 2019).

Citizen Lab at the University of Toronto published a report in June 2020 saying people and firms critical of Wirecard had been subject to attacks by a hackers-for-hire group. This included hedge funds, investigators and journalists. Wirecard has denied any wrongdoing. The US FBI and New York prosecutors have started an investigation into this.