Tuesday 23 June 2020 2:41 pm

Former Wirecard boss arrested as creditors hunt missing €1.9bn

Wirecard’s former boss was arrested on Tuesday on suspicion of falsifying accounts and manipulating markets after the German payments firm disclosed a €1.9bn (£1.72bn) hole in its balance sheet.

Markus Braun turned himself in to prosecutors in Munich on Monday evening after traveling from Vienna. He was later released from custody on a €5m bail.

Read more: Wirecard: Missing $2.1 bn likely does not exist

The 50-year-old Austrian, who quit Wirecard after 18 years at the helm last week, is accused of misrepresenting the company’s accounts and of market manipulation by falsifying income from transactions with so-called third-party acquirers.

The scandal-hit payments firm said yesterday that it was likely that the  €1.9bn missing from its balance sheet simply did not exist. 

Wirecard also withdrew its full-year 2019 and first quarter 2020 financial results.

€1.9bn black hole in Wirecard’s accounts

The former investor favourite is this week holding crisis talks with its banks, which it owes around €1.75bn, to avert a looming cash crunch triggered by the hole in its balance sheet.

The scandal marks a dramatic reversal in fortunes for the company, which had attracted some of the world’s largest investors and had won a place in Germany’s blue-chip DAX index, before a whistleblower alleged that Wirecard owed some of its success to a web of sham transactions.

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Braun, whose lawyer could not be reached for comment by Reuters, said last week in a video statement that Wirecard may have been the victim of fraud, without giving details.

Wirecard’s share price has imploded since news of the hole in its accounts emerged, with around €11bn wiped off the company’s market capitalisation in recent days. 

Shares in Wirecard rose almost 21 per cent on Tuesday following news of Braun’s arrest.

Wirecard said last week that auditor EY had refused to sign off its 2019 accounts as it was unable to confirm the existence of €1.9bn in cash balances in trust accounts — about a quarter of the company’s balance sheet.

Yesterday, the company said in a statement: “The management board of Wirecard assesses… that there is a prevailing likelihood that the bank trust account balances in the amount of €1.9bn do not exist.”

Read more: How do you solve a problem like Wirecard?

The scandal has also damaged the reputation of Germany’s financial regulator, Bafin. 

Felix Hufeld, head of Bafin, described the crisis as a “total disaster”, conceding his agency and others had made mistakes. “It is a scandal that something like this could happen,” he said.

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