$2.1 billion Missing the CEO of Wirecard Leaves

The German payment giant Wirecard said on Monday that the 1.9 billion euros (about 2.1 billion US dollars) missing in its account may not exist at all. Currently, the company is considering selling or closing some businesses to avoid a shortage of funds.

As the the German stock market, Wirecard handles payment for companies such as Visa and Mastercard. In recent days, the company’s market value has evaporated billions of euros.

2.1 billion is missing

Wirecard issued a statement on Thursday saying that EY, an external auditor, was “unable to verify” the company’s 1.9 billion euros (2.1 billion US dollars) of cash that should have been deposited with Asian banks. This fund accounts for about 1/4 of Wirecard’s total balance sheet. There are reports that there are signs that the Wirecard trustee made a false balance confirmation to deceive the auditor.

In recent years, Ernst & Young regularly approved Wirecard’s accounts, but refused to sign the 2019 accounts, which confirmed the results of an investigation released by KPMG in April. At the time, KPMG questioned the authenticity of Wirecard’s profits.

1.9 billion euros disappeared, causing Wirecard’s 2019 annual report to be postponed again. So far, this is the fourth “jump ticket”. What’s more worrying is that Wirecard also said that due to the inability to provide annual reports, the company’s loan of up to 2 billion euros may be required to be repaid early.

CEO resignation; credit rating down to “junk”

Affected by this, Wirecard CEO Markus Braun, who has been at the helm for 18 years, left last Friday and was replaced by James Freis, a former compliance officer of the German Stock Exchange.

Braun hinted at the departure that Wirecard itself may be the victim of fraud. In a video statement issued before his resignation, he said: “Wirecard cannot be ruled out as a victim of mass fraud.”

Braun also said that he chose to leave because he did not want to put a burden on Wirecard. He said: “For the company I have managed for 18 years, the confidence in the capital market has been seriously shaken. In my decision, I respect the fact that the responsibility for all business transactions rests with the CEO.”

At the same time, Moody’s, the rating agency, also downgraded Wirecard’s credit rating to a “junk” level. For Wirecard, which is deeply involved in the cash audit scandal, this move is undoubtedly worse.

Moody’s also said that in the future may further downgrade the company’s rating. Moody’s pointed out that repeatedly delaying the release of the annual performance report may lead to defaults and lead to Wirecard’s urgent need for refinancing.

This fund does not exist at all?

Today, Wirecard issued a statement saying: “The company’s management committee is evaluating the possibility that the unaccounted cash balance of 1.9 billion euros marked by Ernst & Young auditors simply does not exist.”

In a statement, Wirecard also withdrew its 2019 financial statements and said it was considering cutting costs in response to the crisis.

Currently, Wirecard is busy supporting its financial situation and is studying sustainable financing strategies with investment bank Houlihan Lokey. To avoid a shortage of funds, Wirecard is considering selling or closing some businesses.

The two largest banks in the Philippines

Since a whistleblower claimed that Wirecard’s success was partly attributed to the fake trading network, the company has been closely watched and reached its peak when looking for missing cash, then fell into a dead end in the Philippines.

flew around the 1.9 billion euros on the account, and its focus was mainly on two Philippine banks. Wirecard said last week that two Asian banks had failed to locate the accounts holding these cash, but did not disclose the identity of the two banks.

Both the Philippine Islands Bank (BPI) and BDO Unibank stated that Wirecard is not their customer, and they have not seen the funds. The two banks said that Wirecard’s deposit of funds with them was false, and that Wirecard was not their customer.

BPI told the media that it had suspended an assistant manager because the assistant manager’s signature appeared on one of the documents. BDO Unibank told the central bank that one of its marketers seems to have forged a bank certificate.

At the same time, the Philippine Central Bank is also carrying out related investigations. The Philippine Central Bank said that it does not appear that such a fund has entered the country.

Creditors demand greater transparency

Affected by this, Wirecard’s loan of up to 2 billion euros may be required to be repaid in advance. According to the latest news, Wirecard’s loan bank requires the company to increase transparency in exchange for extension.

Informed sources, at least 15 commercial banks such as Commerzbank and Dutch Bank are studying this matter, and most banks tend to defer payment. Wirecard may announce acceptance of outside supervision as early as next week and increase transparency. In exchange, the bank may not require Wirecard to repay the loan in advance.

Informed sources also said that lenders are also considering hiring external help to seek solutions to the risks of potential large-scale defaults.

The new officer took office as the “first fire”

There are reports today that Wirecard’s interim CEO Fries is preparing to become a new department called “Integrity, Law and Compliance”. Currently, he is facing a critical week to convince investors that Wirecard can survive the crisis.

Obviously, Fries has many to-do items, but he also has many related experiences. Analysts say Fries needs to appease investors to stop the stock price from plummeting. A Wirecard spokesperson said Friday that long-term investors have reduced their shareholdings in Wirecard, and Deutsche Bank’s asset management company DWS said it will file a lawsuit against Wirecard.

In addition, Wirecard is facing multiple investigations by local prosecutors and German financial regulator BaFin (Federal Financial Supervisory Authority). One of Fries’s tasks will be to explain to regulators what the lost cash is and how it will affect Wirecard’s balance sheet.

Wirecard began offering a digital wallet called “Boon Planet” last year. This app is similar to Paypal. It is not clear how much money customers have deposited.Wirecard appeased customers last Saturday, saying that their deposits were protected by the German National Guarantee Fund.

Wirecard said that 1.9 billion euros of funds may not exist at all, and we can’t help but think of Ruixing Coffee. In April this year, Ruixing Coffee announced the establishment of a special committee to conduct an internal investigation into the COO Liu Jian and several other employees’ fabricated transactions.

Ruixing Coffee said that the information confirmed in the preliminary stage of the internal investigation showed that from the second quarter of 2019 to the fourth quarter of 2019, the total amount of sales related to false transactions was about RMB 2.2 billion. During this period, certain costs and expenses were also greatly exaggerated due to false transactions.

As an audit agency of Ruixing Coffee, Ernst & Young responded at the time that in the process of auditing Ruixing Coffee’s 2019 annual financial report, it was found that some managers of Ruixing Coffee increased their income during the relevant period of the company through false transactions. Costs and expenses.

Myth is broken

Wirecard was founded in 1999 and is headquartered in Munich, Germany. It was once considered to be one of the most promising technology companies in Europe. It processes payments for consumers and businesses, and provides data analysis services. The company has nearly 6,000 employees in 26 countries around the world, and its revenue in 2018 exceeded 2 billion euros (about 2.2 billion US dollars), more than four times that of 2013.

There is no doubt that Wirecard is regarded as a fintech success in Germany, and was included in the German blue chip DAX index in 2018. Analysts at Mirabaud, a securities company, believe that Wirecard’s DAX membership is now completely inappropriate and should be reassessed.

At the same time, some people began to worry that the growing scandal would damage Germany’s reputation. Fabio De Masi, a member of the German Bundestag, said this was the failure of the country’s financial regulator BaFin (Federal Financial Supervisory Authority).

The future prospects are worrying

Analysts said the incident made Wirecard’s future development into doubt. As one of Germany’s top technology companies, Wirecard said on Monday that it had withdrawn its preliminary performance expectations for 2019 and the first quarter of 2020 and its profit forecast for the year.

Wirecard also said: “The potential impact on the annual financial account of previous years cannot be ruled out.” Wirecard said that the company is in “constructive dialogue” with the lender on continuing to obtain credit. At the same time, it also cooperated with investment bank Houlihan Lokey to “evaluate options for sustainable financing strategies.”

In addition, Wirecard is also considering restructuring, selling or terminating some businesses to potentially reduce costs. Affected by this, in early trading on Monday, Wirecard’s stock price once fell about 45%.

Reviewer overview

$2.1 billion Missing, the CEO of Rexon Wirecard Leaves - /10

Summary

The German payment giant Wirecard said on Monday that the 1.9 billion euros (about 2.1 billion US dollars) missing.

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