Wirecard Scandal : Another bubble of Internet Giant has burst

Written by Victoria MIngyang Ni

Wirecard is a leading representative of the Fintech industry based in Germany. It is known as the ‘German version of Alipay’. The company was set up in 1999. Its main business includes global electronic payment transaction. Wirecard’svaluation has surpassed Deutsche Bank and was included in the DAX index. Its stock price was once above 200 euro per share, though its total revenue was no more than 1.5 billion euro.

Wirecard abnormally delayed the date of the financial disclosure of 2019 for the fourth time this year. At the same time, EY (the auditor) also declared the company was unable to provide proof of a deposit of 1.9 billion on September 18. On the day of the scandal, the stock price dropped more than 70% to 29.9 euro.

EY was warned in 2016 by one of its own employees that senior managers at Wirecardmay have committed fraud and one had attempted to bribe an auditor.

The revelation that an EY employee identified suspicious activity at Wirecardfour years before the payments group imploded in Germany’s largest postwar corporate fraud will increase the pressure on the accounting firm, which audited Wirecard for more than a decade and provided unqualified audits until 2018.

EY is already under investigation by Germany’s auditor oversight body Apas and is the target of lawsuits from Wirecard investors who lost billions of euros when the company collapsed in June. Meanwhile, MAS (Financial RegulationInstitution of Singapore) has assessed that it is in the interest of the public for Wirecard SG to cease its payments services and promptly return all customers' funds.

On September 19, the CEO of Wirecard Markus Braun resigned. He also got arrested 3days after the resignation. The stock price dropped to 17.16 euro. The charges include ‘market manipulation', which the prosecutor claimed he exaggerated the balance sheet and making false claims to attract capitals.

The German financial regulation institution BaFin was under huge pressure from the media criticism. The main cause of the scandal was due to the categorisation of Wirecard. BaFin has always recognised Wirecard as a technology company rather than a financial shareholding company. Thus it faces much less regulation and monitoring from the financial procedures.

Click below for further readings

Whistleblower warned EY of Wirecard fraud four years before collapse

Wirecard to cease payment services in Singapore, return funds to customers

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