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Home Fintechs The fall of Wirecard: Wirecard files for insolvency and former CEO Markus...

The fall of Wirecard: Wirecard files for insolvency and former CEO Markus Braun gets arrested

Wirecard’s former CEO, Markus Braun has been arrested on suspicion of false accounting and market manipulation and Wirecard is filing for insolvency.

Wirecard is a German payments company and its shares have fallen by more than 80% after the auditors from Ernst & Young had raised questions over cash balances worth €1.9bn last week. The company’s CEO Markus Braun resigned with immediate effect.

Read also: Wirecard says missing €1.9 billion probably does not even exist

According to the FT, Munich police say a criminal investigation into Wirecard has been launched. The prosecutors suspect Braun did this in conjunction with others. A spokeswoman for the Munich prosecutors’ office tells the FT that the company’s former management board was under investigation. Braun, who denies the allegations, has since been released on €5 million bail terms.

Until Braun resigned, he was the longest-serving chief executive of a Dax company. And also one of its richest, thanks to a 7% stake in the group he ran from 2002. At its peak in the summer of 2018, Wirecard was worth more than €24 billion on the stock market.

But now in 2020, Wirecard filed for insolvency with German regulators. In a brief statement on its investor relations page, Wirecard said: “The management board of Wirecard AG has decided today to file an application for the opening of insolvency proceedings for Wirecard AG with the competent district court of Munich (Amtsgericht München) due to impending insolvency and over-indebtedness.”

Wirecard wrote to its UK customers explaining that funds are held by ring-fenced accounts and not by WCS and that these funds aren’t mixed with Wirecard’s own funds. “These regulations are designed to ensure that customer funds are ring-fenced in segregated accounts to safeguard them against any other claims by third party creditors of WDCS; and to ensure the funds are not comingled with the working capital or assets of WDCS,” WCS wrote in its letter to customers.

Wirecard also currently owes a consortium of banks about €2bn, and has a further €1.4bn of debt outstanding.

In another statement covering its debts, the company says: “Wirecard AG has conducted negotiations with the lending institutions, taking into account recent developments. In the absence of an agreement with the lenders, there was a likelihood of termination and expiry of loans with a volume of EUR 800 million on June 30, 2020, and EUR 500 million on July 1, 2020.”

“The Management Board has come to the conclusion that a positive going concern forecast cannot be made in the short time available. Thus, the company’s ability to continue as a going concern is not assured.”

Jan Cerny
Jan is an innovation enthusiast and Fintech news reporter. He specializes in news distribution, social media, and content analysis.

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