German payments company Wirecard files for insolvency

An illuminated logo is found outside the Wirecard headquarters in the Aschheim district of Munich, Germany.

Michaela Handrek-Rehle | Bloomberg | fake pictures

Wirecard will file an application to open insolvency proceedings in the Munich district court, the company said Thursday.

The company said in a brief statement that management had decided to open the proceedings “due to impending insolvency and over-indebtedness.”

It marks a tumultuous crash for Wirecard, once a beloved high-flying technology in Germany, after the company revealed that 1.9 billion euros ($ 2.1 billion) of cash on its balance sheet had disappeared.

A new admission Monday that the cash probably did not exist further exacerbated Wirecard’s problems, with the company trying to strike a deal with creditors on a financial lifeline.

Accounting irregularities, first discovered by the Financial Times in an investigation last year, have also threatened to tarnish the reputation of Germany’s financial regulator BaFin.

Wirecard said it was also evaluating whether insolvency claims would have to be filed for its subsidiaries. The company controls a bank in Munich and a card issuing unit in the United Kingdom.

Wirecard’s collapse comes after former CEO Markus Braun was arrested in Munich on charges of inflating the company’s bottom line. Since then, Braun has been released on bail of € 5 million and has to report to the police once a week.

Braun, who ran Wirecard for 18 years, brought the company from a little-known payment processor for gambling and pornography sites to one of Germany’s most popular technology investment targets.

He helped include the company in Germany’s prestigious DAX 30 index in 2018, toppling one of the country’s best-known lenders, Commerzbank.

But Wirecard has seen its share price capitulate since then, dropping from as much as € 100 last week to less than € 4 on Thursday due to further disclosures in its accounting scandal. Wirecard shares collapsed another 79% after trading on them briefly halted Thursday morning.

Wirecard had attempted to locate the lost cash, allegedly held at two banks in the Philippines. But that search was halted after both banks denied any business ties to Wirecard and documents that purported to show that the company deposited funds with them were falsified.

The Philippines seeks to find former Wirecard chief operating officer Jan Marsalek, who was fired from the company this week, in an investigation into people allegedly involved in the case.