Wirecard AG’s former chief executive officer was detained by Munich prosecutors after 1.9 billion euros ($2.1 billion) went missing from the digital-payment company, in a scandal that has rattled Germany’s financial industry.
Markus Braun, who resigned last week, turned himself in Monday evening in Munich as part of a probe into the company’s accounting practices, prosecutors said in an e-mailed statement. A judge will review whether he can be kept in custody.
The company is fighting for survival after acknowledging the missing funds probably don’t exist, deepening its accounting woes. The payment processor said it’s in discussions with creditors and is considering a full-scale restructuring after pulling its financial results for fiscal 2019 and the first quarter of 2020.
“It’s a brutal development — it could hardly have turned out worse,” Oliver Kipper, a defense lawyer who isn’t involved in the case, said before Braun’s arrest. “You should know what happened to 1.9 billion euros of assets you have listed in your books.”
In less than a week, the fintech company once hyped as the future of German finance has lost most of its market value.
“It’s a complete disaster we’re looking at,” said Felix Hufeld, head of BaFin, Germany’s top financial regulator, at a panel discussion Monday. “It’s a shame that something like that happened.”
Munich prosecutors accused Braun of inflating Wirecard’s balance sheet and sales volume by feigning income from transactions with so-called third-party acquirers, possibly in cooperation with other perpetrators. That would make the company appear financially strong and more attractive for investors and customers, officials said in the statement.
Officials at Wirecard and Braun’s attorney weren’t immediately available to comment.
The Wirecard saga has been under review for months, but prosecutors’ focus has likely changed with last week’s developments.
Initially, authorities looked at media reports that caused the stock to tumble, with Wirecard a potential victim of market manipulation. Then, earlier this month, they began an investigation targeting the management board, over how an internal review by KPMG was communicated to the markets.
The arrest of Braun shows, however, that the probes have come full circle, with the former victims becoming the suspects.
“Given the numbers, it’s certainly the biggest accounting scandal in Germany,” said Katie Schroeder, a criminal defense lawyer in Frankfurt. “You’d have to think pretty hard to find a case of such scope.”
— With assistance by Sarah Syed
Source: Read Full Article