In a German tech giant’s fall, charges of lies, spies, fraud and missing billions
Wirecard files for insolvency after bogus accounts discovered
In the elite corridors of corporate Germany, Markus Braun had become a legend.
A little-known entrepreneur until just a few years ago, Braun had forged an obscure Bavarian company called Wirecard into a German tech icon, winning a coveted spot on the benchmark DAX stock index. Wirecard provided the invisible financial plumbing that, with a wave of plastic over a card reader almost anywhere in the world, made transactions happen. Hedge funds and global investors scrambled to buy shares.
When critics raised red flags about the company’s seemingly miraculous success, questioning murky accounts and income that could not be traced, Braun, a methodical executive from Austria who was the company’s biggest shareholder, hit back repeatedly, and the stock price skyrocketed.
But Thursday, Braun’s empire
came crashing down after Wirecard filed for insolvency proceedings, days after the financial technology company acknowledged that $2.1 billion that it claimed to have on its balance sheets probably never existed. Its longtime auditor, EY, formerly Ernst & Young, said the company had carried out “an elaborate and sophisticated fraud.” Mastercard and Visa said Friday that they were considering cutting
ties.
Wirecard, which owes creditors nearly $4 billion, said its survival was not assured, sending its battered shares $2.24 Friday from more than $112 a week ago. The European Commission on Friday opened an investigation into Germany’s financial regulator for failing to catch the problems, despite numerous reports of wrongdoing.
How one of Germany’s most feted companies fell from grace it is the first listed member of the 30-year old DAX to go bust is something investigators in several countries are still trying to piece together. German prosecutors arrested Braun on Monday on accusations of inflating sales volume with fake income to lure investors, and authorities are searching for Jan Marsalek, his former chief operating officer, who was fired Monday and may be in Asia.
The Philippine government is investigating the missing $2.1 billion, which Wirecard claimed to have held in two Philippine banks; the banks said last week that they had never dealt with Wirecard.
But one thing is sure: Anyone paying attention should not have been surprised. Since 2008 Wirecard attracted skeptics who wondered how the company could generate the worldwide revenue it claimed. The questions, raised by analysts and investigated in a series of articles in The Financial Times, were repeatedly waved away by Braun, whose global ambitions grew with the stock price.
Wirecard and lawyers for Braun did not respond to requests for comment. Braun did
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