German finance tech company Wirecard AG has filed for insolvency days following the resignation and arrest of its chief executive officer Markus Braun in connection with the missing $2 billion in its accounts.
In a media release Thursday, the credit card operator disclosed it had lodged an application to open insolvency proceedings in the Munich district court due to imminent insolvency and over-indebtedness. Wirecard became Germany's first member of the premier blue-chip DAX index to collapse.
Wirecard nosedived Thursday owing nearly $4 billion to lenders after exposing a gaping crack in their accounts that its auditor EY claimed was the result of a sophisticated multinational scam.
In its insolvency filing, the payments group said that, with 1.3 billion euros (1.5 billion dollars) of loans due in the next few days, its survival as a continuing concern was not assured.
The implosion of Wirecard came just seven days after EY, the auditor for over 10 years, declined to sign off on the accounts for 2019, pushing Braun out and causing him to admit that $2.1 billion of his cash actually did not exist.
The unexpected crash of Wirecard is an "unparalleled scandal", Germany's finance minister on Thursday said. Finance Minister Olaf Scholz stated the debacle "must be a wake-up call that we need more oversight, more controls" over such financial firms, RTL Today reported, citing an AFP story. "The scandal is unparalleled in the financial world," Scholz added.
Braun, the Austrian tech executive who established Wirecard into one of Germany's most successful firms, was arrested by German authorities earlier this week on allegations that the company's balance sheet and profits had been falsely inflated through fraudulent transactions. Investigators said Braun may have worked alongside other suspects.
Released from custody on bail of €5 million ($5.7 million), Braun has suggested that the company may itself be actually the victim of fraud. His legal counsel has not responded to requests for comment. Jan Marsalek, member of the board and Wirecard chief operating officer, was terminated on Monday.
Wirecard, which processes tens of billions of euros in debit and credit transactions each year, disclosed that it failed to reach an agreement with its creditors that could help the group survive after a chaotic week. In the absence of a deal with the lenders,
Wirecard said there's a possibility of termination of loans amounting to €800 million June 30 and €500 million on July 1. Founded in 1999, Wirecard employs around workers across its 26 locations and has over 313,000 clients, according to its website.
