SoftBank Wants To Cut Ties With Wirecard After $2.1 Billion Fraud

SoftBank is looking to separate itself from Wirecard because of the unfolding controversy involving billions of dollars of missing money and fabricated accounts from the German credit card operator, The Wall Street Journal disclosed.

The partnership between Softbank and Wirecard includes an investment of $1 billion that SoftBank helped arrange for the German payments group. The Japanese lender, one of the biggest tech investors in the world, signed an agreement in April last year for five-year cooperation with Wirecard, which it now wants to end, WSJ said.

Under the agreed conditions, SoftBank would have also introduced Wirecard to the South Korean and Japanese financial markets. Wirecard is currently under probe by the European Union after the company revealed that $2.1 billion in cash had gone missing from its accounts.

Wirecard's stakeholders have filed a criminal complaint against the payment processing group's auditors EY. SoftBank is also considering legal action against the auditors. The lender's $100 billion Vision Fund, which invests in startups, disclosed losses amounting to around $16.5 billion as a result of soured investments in companies like Uber Technologies and WeWork.

Complex securities used to sell SoftBank's risk on its Wirecard partnership in 2019 are going to be unwound after the German firm's collapse sparked a liquidation of the notes' underlying collateral, based on a notice sent to investors on Thursday that was seen by Bloomberg. The notes were supported by Wirecard convertible bonds, which will now be unloaded in a process that will be overseen by Credit Suisse Group AG.

Softbank's joint ventures with Wirecard did much to support a boost of around 20 percent in the German group over the next few months. In September last year, Wirecard shares fetched for 150 euros each, well above the convertible bond price. These notes were issued with a yearly coupon of almost 2 percent and could be converted into Wirecard stocks if the company hits a strike price of 130 euros, conditions seen as advantageous to Softbank.

Last week, SoftBank disclosed that it had pressed Wirecard to look into a special auditor for the accusations against the company, and in an email from October 2019, divulged it could have helped put such accusations behind it once and for all, the email said, as quoted by WSJ.

Wirecard applied for bankruptcy protection from creditors after investigations showed that more than $2 billion previously disclosed as cash went missing from its accounts and perhaps was never there in the first place.