Wirecard The multi-billion dollar financial scandal at Wirecard

December 2 – The bankruptcy of payment processor Wirecard is one of the biggest financial scandals in Germany. How did this happen and what have been the consequences so far? An overview of important events:

2015

April – The Financial Times (FT) newspaper begins a series of articles titled “House of Wirecard” pointing out the inconsistencies.

2016

February – Zatarra Research, a company run by stock speculator Fraser Perring, accuses Wirecard of fraudulent activity in an analysis that is posted on the internet.

March/May – Financial watchdog BaFin targets Perring and other investors who had bet on a crash in Wirecard shares with short selling on suspicion of market manipulation and files a criminal complaint with the Munich public prosecutor’s office.

2017

February – The banking supervisory authority BaFin, together with the Bundesbank, examines whether the parent company Wirecard AG should be classified as a financial holding company. Result: no. This means that the financial supervisor does not have access to the whole group, only to Wirecard Bank. The ECB then agrees with this assessment.

2018

September – Wirecard ousts Commerzbank from Dax. The action rises to a record high of 199 euros, the market value climbs to almost 25 billion euros. This means the company is worth more than Deutsche Bank at this point.

2019

January – The “Financial Times” raises new allegations against Wirecard. It is a possible money laundering and account tampering in Asia, in which a Wirecard official in Singapore is allegedly involved. Other articles with allegations of accounting fraud against the group follow.

February – BaFin opens an investigation into the report. It targets short sellers, journalists and Wirecard officials suspected of market manipulation and false or misleading information in Wirecard AG’s financial reports.

February 15 – BaFin instructs the German Financial Reporting Enforcement Panel (DPR) to analyze Wirecard’s balance sheet.

Feb. 18 – Along with a ban on short selling, BaFin prohibits betting on Wirecard stock price losses for two months – a previously unique process.

February 19 – Federal Finance Minister Olaf Scholz is briefed. The SPD politician learns that the BaFin is investigating market manipulation in all directions – including those responsible for Wirecard AG – and that the DPR is investigating possible accounting irregularities.

April 10 – BaFin files a complaint against two journalists and FT investors suspected of market manipulation.

April 15 – BaFin imposes a fine of 1.52 million euros on Wirecard AG. Reason: late publication of annual reports.

April 24 – Wirecard wins the telecommunications and Internet group Softbank9434.T as a strategic partner. The alliance with the well-known Japanese investor puts doubts about the German payment processor in the background.

June 18 – Wirecard management found a mixed response at the annual general meeting. While some complain about the “chaostage” and the lack of transparency, others rejoice in “moments of happiness” in the face of the evolution of the share price, which is progressing despite repeated declines. This will be the last general meeting of the group.

July – BaFin special audit at Wirecard Bank. The institute will be placed under intensive anti-money laundering surveillance on July 15.

Oct. 21 – Wirecard assigns KPMG auditors a special audit to refute allegations of accounting fraud.

2020

January 11 – At the head of the supervisory board, the former financial director of the Deutsche Börse Thomas Eichelmann (54 years old) replaces the retired banker Wulf Matthias (75 years old).

Feb. 25 – According to reports from both sides, the Bavarian authorities and the Federal Government speak for the first time about money laundering supervision at Wirecard AG. According to the Federal Ministry of Finance, the district government of Lower Bavaria declares itself responsible to the BaFin. Later, Bavarian Interior Minister Joachim Herrmann denied that the state authority was responsible.

April 28 – KPMG auditors give the company a bad report. There is no evidence of some sales revenue, alleged deposits in fiduciary accounts of around one billion euros have not been sufficiently proven, according to a special report that Wirecard itself had commissioned. The CEO of the Braun Group, meanwhile, considers the allegation of accounting fraud raised in the media to be refuted.

May 8 – Wirecard’s supervisory board reduces the powers of CEO Braun. He apologizes “for the turbulence of the past few weeks and months”.

May 11 – The Munich District Court drops criminal charges against stock speculator Fraser Perring in exchange for a fine.

June 5 – Prosecutor’s raid on Wirecard’s headquarters in Aschheim near Munich. The financial regulator BaFin had denounced the entire board of directors of Wirecard suspected of market manipulation. Authorities are investigating the suspicion that board members made misleading statements during KPMG’s audit and thereby manipulated the stock price.

June 18 – EY auditors refuse to certify Wirecard’s 2019 balance sheet for missing 1.9 billion euros in escrow accounts in the Philippines. Wirecard suspends Jan Marsalek, board member responsible for operational activities. Braun explains that the company would be the victim of “a case of fraud of a significant scale”.

June 19 – Braun, the boss of Wirecard, resigns. New Chief Compliance Officer James Freis takes over as Chief.

June 22 – Wirecard says bank balances in question of €1.9 billion “with overwhelming probability do not exist”. The Munich public prosecutor’s office is investigating the falsification of the balance sheet. Braun faces prosecutors. Marsalek is fired and goes into hiding.

June 25 – The Dax group files for bankruptcy.

July 9 – The Munich public prosecutor’s office confirms that it has been investigating suspicions of money laundering against Wirecard officials for a year. Prosecutors had investigated the suspicions several times over the past decade, but found nothing.

July 22 – The Munich prosecutor says Wirecard has been falsifying balance sheets and inflating sales since at least the end of 2015. She is now accusing Wirecard’s former management team of business fraud. Businesses with third-party partners in Asia were invented to make the business look more successful. Braun, who was originally released on bail, is now to be remanded in custody. Other managers are arrested.

July 24 – Finance Minister Scholz proposes the consequences of the Wirecard scandal. The document, which it calls the “Federal Government’s Action Plan,” was only coordinated with the SPD-led Justice Department when it was released.Read full article

August 24 – Food delivery service Delivery Hero replaces Wirecard in the Dax.GDAXI. Deutsche Börse had specially modified its rules in order to be able to banish Wirecard more quickly from the leading index.

August 25 – The Munich District Court opens insolvency proceedings against Wirecard AG. The former stock exchange star is dismantled, more than half of the approximately 1,300 employees in Germany are made redundant. Creditors should be prepared for high losses, as debts far outweigh assets.

September 3 – The Munich public prosecutor’s office terminates its investigation into the journalists of the “Financial Times” in connection with their reporting on Wirecard. The suspicion of market manipulation has not been confirmed.

October 8 – The committee investigating the Wirecard scandal begins its work in the Bundestag. It aims to clarify the omissions of the government and the authorities and to formulate recommendations for the reform of the supervisory authorities and other control bodies.

November 03 – The European Securities Regulatory Authority, ESMA, has harshly criticized Federal Finance Minister Olaf Scholz and the German authorities. There is a whole series of gaps, omissions and inefficient processes.

November 19 – Jailed former Wirecard boss Markus Braun is heard as a witness before the Bundestag’s investigative committee. Contrary to many expectations, the Austrian refused to answer many questions before the parliamentary inquiry committee and only read a brief statement.

2021

January 29 – Federal Minister of Finance and SPD candidate for chancellor Olaf Scholz dismisses BaFin Chairman Felix Hufeld and Vice-Chairman Elisabeth Roegele. In the Wirecard scandal, Scholz and Bafin have long been criticized.

February 2 – Federal Finance Minister Scholz pushes forward the reform of BaFin. After the first consequences had already been poured into a bill, Scholz presented a seven-point package. The BaFin must be given more powers and, according to Scholz, become “a financial regulator with teeth”.

February 24 – The chairman of Germany’s Financial Reporting Enforcement Panel (DPR), Edgar Ernst, announces his resignation on December 31. The DPR, known as the “assessment police”, which is organized as a private association, is accused of conflicts of interest and too lax controls.

February 25 – Audit firm Ernst & Young (EY), which previously worked for Wirecard, fires its German boss Hubert Barth and has internal processes audited by independent experts.

June 25 – The Bundestag unanimously recognizes the final report of the Wirecard inquiry committee. In various evaluations, the parliamentary groups criticize the mistakes made by many responsible people in the authorities and in politics.

2022

March 14 – After extensive investigations, the Munich prosecutor files a complaint against Braun and two other Wirecard officials. Investigators accuse Braun, his chief accountant Stephan von Erffa and the governor of Wirecard in Dubai, Oliver Bellenhaus, of accounting fraud, market manipulation, infidelity and commercial fraud. Investigations against other suspects are ongoing.

June 9 – Wirecard’s insolvency administrator Michael Jaffe has raised a good billion euros by selling parts of the business, according to a preliminary balance sheet. This is offset by claims from banks, social security funds and other creditors of more than 3.3 billion euros.

September 21 – The Munich District Court allows the indictment to stand unchanged.

November 9 – The Munich District Court sets the start of the trial for December 8 and tentatively plans 100 court dates by the end of 2023.

The multi-billion dollar financial scandal at Wirecard

Source: Reuters

Cover photo: Symbolic photo

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