Wirecard files for insolvency after former CEO arrested in $ 2 billion scandal

The digital payments company said in a statement Thursday that it had opened legal proceedings in Munich “due to impending insolvency and over-indebtedness.” The company’s shares, which have lost 90% of their value in less than a week, were suspended on the Frankfurt stock exchange.

Former Wirecard CEO Markus Braun arrested after $ 2 billion scandal erupted
Markus Braun, the Austrian CEO of technology who built Wire card (WCAGY) At one of Germany’s largest companies, he was arrested earlier this week on suspicion of artificially inflating the company’s balance sheet and sales through bogus transactions. Prosecutors said Braun may have acted cooperatively with other perpetrators.

Wirecard acknowledged Monday that € 1.9 billion ($ 2.1 billion) in cash included in the financial statements, or about a quarter of its assets, probably never existed in the first place. The company withdrew its preliminary results for 2019, the first quarter of 2020 and its profit forecast for 2020.

The scandal erupted last week when Wirecard said its auditor, EY, was unable to locate the funds in trust accounts and refused to sign the company’s financial results. The aftermath is raising questions about how the company’s regulators and auditors might have overlooked accounting irregularities that are already making comparisons to Enron, the American energy giant that filed for bankruptcy in 2001.

Braun has suggested that Wirecard may be a victim of fraud. Braun’s lawyer has not responded to requests for comment.

– Stephanie Halasz contributed reporting.