BERLIN / FRANKFURT (Reuters) – German prosecutors said on Monday they had arrested the head of a Dubai-based Wirecard subsidiary, widening the circle of suspects in a multi-million dollar fraud investigation into the collapse of the payment company.
FILE PHOTO: The logo of Wirecard AG, an independent provider of outsourcing and private label solutions for electronic payment transactions, is displayed at its headquarters in Aschheim, near Munich, Germany, on July 1, 2020. REUTERS / Andreas Gebert / File Photo
The Munich prosecutor’s office said in a statement that it had questioned the chief executive of Cardsystems Middle East FZ-LLC earlier in the day and arrested him with a court order.
The executive had traveled from Dubai and turned himself in, prosecutors said, without naming him. Unless defendants are publicly known, their identity can be protected by German law to avoid jeopardizing court proceedings.
The arrest was made on suspicion of conspiracy to commit fraud, attempted fraud, and to help and encourage other crimes, prosecutors said. They said there was a risk that he would run away or tamper with the evidence.
Wirecard filed for insolvency last month due to creditors € 4 billion ($ 4.5 billion) after revealing a € 1.9 billion hole in its accounts that its EY auditor said was the result of sophisticated global fraud .
Investigative journalists and speculators had long highlighted Wirecard’s trust in a dark trio of third-party purchasing partners, one of which was Cardsystems, to generate most of its reported revenue and profit.
Meanwhile, Wirecard’s creditors committee was scheduled to meet for the first time on Tuesday, people close to the matter said.
INVESTIGATION MEETS THE STEP
The latest arrest came after police and prosecutors raided Wirecard’s headquarters in Munich and four properties in Germany and Austria last Wednesday as they expanded their investigation.
Prosecutors have said they are investigating Wirecard chief financial officer Alexander von Knoop and chief product officer Susanne Steidl, as well as former CEO Markus Braun and chief operating officer Jan Marsalek.
Wirecard did not immediately respond to a Reuters request to comment on behalf of von Knoop and Steidl.
Braun has been released after posting bail of € 5 million. Marsalek’s whereabouts are unknown, and his lawyer denies requests for comment.
Creditors will meet Tuesday to discuss the latest in the fraud investigation, as well as planned asset sales with which insolvency administrator Michael Jaffe hopes to recover at least a fraction of the money owed, people close to the matter said.
One of the people said that Jaffe was likely to raise only around € 400-500 million for Wirecard’s assets, including around € 100 million for his banking unit. That equates to approximately 10% of the total owed to them.
Wirecard lenders will be represented by ING and German regional bank LBBW, while bondholders will be represented by a law firm appointed by Cyrus Capital, people close to the matter said. Holders of other securities have named the German law firm Tilp to the creditors’ committee, while employees will also be represented, the people said.
Creditors committee members declined to comment or were not immediately available for comment.
Reports by Douglas Busvine, Joern Poltz, Alexander Huebner and Arno Schuetze; Editing by Arno Schuetze / Edward Taylor / Jane Merriman