What was the Wirecard scandal? Know how the $25 billion blue-chip company gamed the German government
This file photo taken on September 18, 2018 shows the company logo at the headquarters of the technology and financial services company Wirecard in Aschheim near Munich, southern Germany
German digital payments company Wirecard is back in the spotlight. More than two years after its collapse, the company’s CEO Markus Braun and two former managers will face trial for fraud. In this article, you will get to know the details of the scandal. The scandal is one of the biggest in European history and has drawn comparisons to the accounting fraud that brought down US energy giant Enron in the early 2000s.
When was Wirecard founded, and what was its modus-operandi?
The company was founded in 1999 near Munich. It started as a digital payment company for porn and gambling websites. Markus Braun was in charge of the company from 2002, and under him, the company expanded at a staggering pace. It also bought up small digital payment companies across Asia and became a reputed blue-chip DAX index company. On its best day, the company was valued at a whopping $25 billion.
How was the Wirecard scandal unearthed?
Thanks to Financial Times, the Wirecard scandal came out in the public in 2019 after FT drew the world’s attention on irregularities at Wirecard’s Asian subsidiaries. In June 2020, it was established that cash worth $1.9 billion in two Philippine accounts likely didn’t exist. This massive revelation tanked Wirecard’s stock price by 99 per cent. It was the first DAX company to go bankrupt and was later taken off the reputed list.
What was the Wirecard Scandal?
Allegations against Wirecard include fabricating transactions involving a vast network of affiliates and partners to inflate earnings. German prosecutors claim that by including revenues from so-called third-party acquirers (TPAs), companies that processed payments for Wirecard in locations where it lacked an operating license, Braun and his co-defendants misrepresented the financial results for the years 2015 to 2018.
Response from the German authorities
Germany’s market regulator Bafin came under heavy fire after the scandal was noticed. Bafin even filed a criminal case against the FT journalists for “market manipulation”, but was dropped after the company came crashing down.
(With inputs from agencies)
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