Wirecard chief quits as crisis deepens after missing €1.9bn revelation

Wirecard's chief executive Markus Braun has resigned with immediate effect as the payment group's share price continued to collapse a day after it revealed that €1.9 billion of cash was missing.

Shares in Germany’s once high-flying payments firm have crashed 80 per cent in two days of chaotic trading after it said auditors at EY were presented with “spurious” documents detailing cash balances.

The company had seen its low-profile Irish business caught up in an external investigation in recent months amid reports of accounting irregularities across a number of the group's international operations, including Singapore, Dubai and India.

Wirecard said in a regulatory statement on Friday that its newly appointed chief compliance officer, James Freis, who only joined the company on Thursday from Deutsche Börse, had been named interim chief executive.

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Wirecard said that the resignation of Mr Braun, who is also the fintech’s largest shareholder, happened “in mutual consent with the supervisory board”.

Mr Braun's resignation follows the suspension on Thursday of Wirecard's chief operating officer Jan Marsalek.

Earlier two of Germany’s biggest investors threatened legal action over an escalating accounting scandal that leaves the future of the once high-flying payments company in doubt.

Union Investment, which was until recently a top 10 shareholder, joined fellow asset manager DWS in threatening to sue the company that for almost two decades was regarded as a rare German tech success story.

Wirecard was plunged into crisis on Thursday when it revealed that €1.9 billion held in escrow accounts at two Asian banks was missing. It was told by EY, its longstanding auditor, that there were indications a trustee of Wirecard bank accounts had attempted “to deceive the auditor” and may have provided “spurious cash balances”.

Bank of the Philippine Islands is one of the two Asian banks where Wirecard said it had deposited money, according to a person familiar with the matter.

On Friday, the bank told the Financial Times that a document showing that Wirecard was the bank’s client was “spurious”, adding that the German company “is not a client”. The bank said it continued to investigate the matter.

In a video statement published late on Thursday night, Mr Braun said it was “unclear” why the Asian banks “have stated to the auditor that the confirmations are spurious”.

Mr Braun, who spearheaded the company’s meteoric growth that at one point turned him into a billionaire and catapulted Wirecard into Germany’s premier stock market index, said that “it cannot be ruled out that Wirecard has become the aggrieved party in a fraud of considerable proportions”.

Shares in the German fintech were trading 43 per cent lower at €22.00 in early afternoon trading, after falling as much as 51 per cent earlier.

Lawsuit

The unravelling in Wirecard's shares and bonds caps an 18-month period in which the company has tried to assuage fears over its accounting, including commissioning a special audit from KPMG. The findings of the special audit, published in late April, failed to allay concerns.

Yesterday’s disclosure that money was missing from its accounts left Wirecard unable to publish its 2019 results as promised and gives its lenders the options to terminate €2 billion of loans if the results are not released on Friday.

The Financial Times reported in October that Wirecard staff appeared to have conspired to fraudulently inflate sales and profits at Wirecard subsidiaries in Dubai and Dublin and mislead EY, the group’s auditor for a decade.

The continued drop in the share price has left the stock of the Aschheim-based company down almost 80 per cent in the past two days, wiping out €10 billion of its market capitalisation.

Last month, one of Germany's most prominent securities lawyers filed an investor lawsuit against Wirecard. Tübingen-based lawyer Andreas Tilp, who is leading a €10 billion collective lawsuit against Volkswagen and Porsche, is accusing the payments group of "false, omitted and incomplete" disclosures.

Wirecard has always denied any wrongdoing. – Copyright The Financial Times Limited 2020