Abu Dhabi, UAEWednesday 25 November 2020

Chief executive of scandal-hit FinTech firm Wirecard resigns

The bombshell comes a day after Ernst & Young auditors said $2.1bn were missing from the Munich company's accounts

Markus Braun, founder and chief executive of Munich-based Wirecard, resigns on Friday. AFP
Markus Braun, founder and chief executive of Munich-based Wirecard, resigns on Friday. AFP

The founder and chief executive of scandal-hit Wirecard resigned on Friday after the German payments provider was hit with fresh fraud allegations that have left it struggling for survival.

Markus Braun "resigned today with immediate effect", the firm said in a statement, adding that the decision was made "in mutual consent with the supervisory board".

He will be replaced on an interim basis by the US manager James Freis.

The bombshell comes a day after auditors from Ernst & Young said $2.1 billion (Dh7.7bn) were missing from Wirecard's accounts, intensifying a months-long crisis in the company.

The news prompted investors to abandon the once popular Fintech company in droves, sending Wirecard's share prices into a tailspin.

The stock has plunged by more than 76 per cent since Thursday morning and was trading at $23.90 per share on Friday.

It marks a stunning fall from grace for the Bavarian start-up, set up in 1999 and once seen as a darling of the FinTech scene thanks to the growing global popularity of electronic payments.

It entered Germany's prestigious DAX 30 index with great fanfare in 2018 after nudging out traditional lender Commerzbank.

But since then Wirecard has been dogged by a series of articles in the media alleging accounting irregularities in its Asian operations.

The company's four board members - including Mr Braun - have been under investigation since early June by Munich prosecutors for "market manipulation", and Wirecard's headquarters were searched as part of the probe.

The scandal deepened on Thursday when the firm was forced to delay the publication of its 2019 results for a fourth time.

Instead, Wirecard said in a statement that auditors at EY had identified "spurious balance confirmations" relating to "cash balances on trust accounts".

The auditors' red flag was raised over escrow accounts at two Asian banks, which were supposed to hold $2.1bn to manage risk for merchants using Wirecard's payment services.

Wirecard said there were "indications" that the balances had been falsified "in order to deceive the auditor".

The two Philippine banks that were supposed to hold the cash denied having a relationship with Wirecard, according to Bloomberg News.

Wirecard's board responded by fling a legal complaint against "unknown persons", saying they could have fallen victim to a vast fraud.

"It is currently unclear whether fraudulent transactions to the detriment of Wirecard have occurred," Mr Braun said on Thursday.

But the clock is ticking for Wirecard, as $2.2bn of credit could be withdrawn if it is unable to publish its results for last year by Friday.

According to preliminary figures, the group said it had processed $192bn of transactions in 2019, up 38.5 per cent.

Revenues grew 37.5 per cent, to $3.1bn, while net profits added 39 per cent at $535 million, Wirecard said.

Updated: June 19, 2020 04:47 PM

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