Missing 1.9b euros plunges Wirecard into big scandal

In what could be one of the biggest financial frauds of recent years, shooting-star German payments provider Wirecard on Monday admitted 1.9 billion euros that auditors say are missing from its accounts likely "do not exist".

The scandal has already claimed the scalp of founder and chief executive Markus Braun, and adds to a series of recent German upsets.

Over the past decade, business headlines have been dominated by the crippling consequences of repeated financial infractions at Deutsche Bank and the globe-spanning "dieselgate" emissions fraud that has cost carmaker Volkswagen more than 30 billion euros.

In Wirecard's case, the 1.9 billion euros ($2.1 billion) that were supposed to be sitting in trust accounts in the Philippines make up a quarter of the company's balance sheet.

But "on the basis of further examination... there is a prevailing likelihood that the bank trust account balances in the amount of 1.9 billion EUR do not exist," Wirecard said Monday.

The admission that the sums have vanished follows more than a year of reporting, especially by the Financial Times, on accounting irregularities in the company's Asian division.

Now Wirecard is in crisis talks with banks to keep the lights on and is "examining a broad range of possible further measures to ensure continuation of its business operations," including restructuring and selling off or simply halting some activities.

Interim CEO James Freis has tasked investment bank Houlihan Lokey with the tough talks with creditors.

But investors' confidence appeared to be evaporating fast, as shares in Wirecard were trading around 16 euros early on Monday-down from almost 100 last Wednesday, before auditors' doubts about the missing cash became public.

Meanwhile, stocks opened lower on Monday, with fears over increasing global virus infections outweighing hopes for a resumption of business activity, and investors eyeing economic indicators due this week.

The benchmark Nikkei 225 index was down 0.55 percent or 123.92 points at 22,354.87 in early trade, while the broader Topix index fell 0.37 percent or 5.93 points to 1,576.87.

"Japanese shares are starting with subdued trade after the US Dow fell by more than 200 points," Toshiyuki Kanayama, senior market analyst at Monex, said in a note.