It’s safe to say that Wirecard has fallen on hard times.
The German FinTech group saw impressive growth in recent years. The company, a global supplier of financial solutions, has collaborated with over 250,000 companies, including Allianz, Qatar Airways, KLM, and Transport for London, just to name a few. In 2018, Wirecard had €22.5 billion in market capitalization, more than twice that of Germany’s second largest lender, Commerzbank.
But earlier this week, Wirecard’s Founder and CEO Markus Braun resigned after it was discovered that €1.9 billion ($2.1 billion) were missing from the company’s accounts in the Philippines. The auditor, Ernst & Young, became suspicious of letters regarding certain accounts – eventually the Philippine banks confirmed the letters were fake.
“The management board of Wirecard assesses on the basis of further examination that there is a prevailing likelihood that the bank trust account balances in the amount of 1.9 billion euro do not exist,” the company said in a statement, adding that it is withdrawing its 2019 and first-quarter 2020 financial results.
Braun was also arrested, facing charges of accounting fraud and market manipulation aimed to inflate the company’s bottom line. As a result, Wirecard’s shares plummeted 80 percent. Felix Hufeld, head of Germany’s financial watchdog Bafin, called the crisis a “total disaster.” He admitted that Bafin and others made crucial mistakes. “It is a scandal that something like this could happen,” he said.
Wirecard did get some good news by the end of the week: Lenders have provided the firm with 1.75 billion euros ($2 billion) in credit. Sources have revealed that Washington D.C.-based financial consulting firm, FTI Consulting, will be monitoring Wirecard’s ability to meet the loan terms, and lenders are currently reviewing documents as well as meeting with Visa Inc. and Mastercard to determine the best way to ensure the loan will be repaid.
In addition, as many as 15 lenders are trying to gauge potential losses, including ABN Amro Bank NV, Commerzbank AG, and ING Groep NV, who have loaned Wirecard 1.6 billion euros ($1.8 million) in credit.