Mammoth Wirecard process: What is known so far

Why did Wirecard have to file for bankruptcy?

For years, Wirecard was portrayed publicly as an extremely successful fintech company that had made a meteoric rise on the stock exchange and had even been listed on the DAX since 2018.

Business with e-commerce, payment and fintech services was apparently flourishing - but partly thanks to third-party partners such as Payeasy (Manila) and Al Alam (Dubai), who allegedly processed credit card payments for Wirecard. To financially secure these payments, trustees, including a Filipino lawyer, should keep money in accounts for Wirecard. However, this money never existed because the third-party partner business never existed, emphasises the Munich I public prosecutor's office.

Even stronger: It is currently assumed that Wirecard AG has presented incorrect balance sheets since 2015. Without taking into account the third-party partner business, Wirecard would have had to report losses and thus alienate banks and (private) investors. Because of the “balance sheet gap” of just under two billion euros, Wirecard had to file for insolvency on June 25, 2020, but there were signs of irregularities years earlier.

• Under the title “House of Wirecard,” the Financial Times published the first critical articles about Wirecard in 2015.

• In February 2017 Manager Magazine reported on opaque balance sheets. Wirecard rejected these allegations as unfounded.

• 2018 Fahmi Quadir, founder of the New York hedge fund Safkhet Capital, recognized criminal activities by Wirecard. She described the company as a gigantic money laundering machine. yours Information that it forwarded to BaFin in spring 2019 had, as well as allegations of the short selling ban on Wirecard shares, were not followed up by the authority, according to their statements.

• In February 2019, the Wirecard share price fell from a good 167 euros to below 86 euros due to three Financial Times reports: Employees in Singapore would have invented customers and sales in order to obtain a business license in Hong Kong and achieve Wirecard's earnings targets. On February 8, 2019, police raided the branch in Singapore. Wirecard denied the allegations and filed a lawsuit against the Financial Times and for price manipulation.

After the FT continued reporting on manipulated business figures, the Wirecard Supervisory Board commissioned the auditing firm KPMG to carry out a special investigation into the allegations in October 2019. The management consultancy actually found irregularities and reported: It was hardly possible to make any statements about the amount and existence of significant sales in the payment service provider's business in the years 2016 to 2018 examined. It is unclear whether the transactions even exist and, if so, whether they were correct. As a result, Wirecard had to postpone the presentation of the balance sheet for the past financial year several times because the auditors from EY, who had confirmed the Wirecard balance sheets for years, refused to certify the 2019 balance sheet.

A process of the century begins

Following the collapse of the Wirecard Group, one of the most spectacular commercial court proceedings in post-war history finally began on December 8, 2022. Initially, the 4th Criminal Division of the Munich Regional Court I has set around 100 trial dates in the courtroom in southern Munich by the end of 2023. However, the schedule published by the Higher Regional Court of Munich states that organizational preparations have already been made for 2024. It is still unclear when a decision will be made. The question of possible compensation for cheated investors and creditors is resolved in other proceedings.

Three defendants, a fugitive and piles of documents

Former CEO Markus Braun, former managing director of a Wirecard subsidiary in Dubai, Oliver Bellenhau, and former chief accountant Stephan von Erffa sit in the dock. Former board member Jan Marsalek is fleeting and is being sought with an international arrest warrant. It is assumed that he is in Russia. As a member of the Board, Marsalek was responsible for the third-party partner business. He was also responsible for the Asia region and is therefore likely to play a central role in the process, which may never be fully resolved without the fugitive.

Ex-Wirecard boss Markus Braun, on the other hand, has been in custody for around two and a half years and will be interrogated in the coming months and years to clarify burning questions. Because the public prosecutor accuses the three defendants of market manipulation, infidelity, misrepresentation and commercial gang fraud. In his “opening statement,” Braun lawyer Dierlamm not only denied the allegations, but also made serious allegations to the public prosecutor.

For example, the entire process was suffering from a “birth defect” because the investigators had relied on the statements of an implausible witness - the key witness Bellenhaus. According to his defense attorney, Markus Braun sees himself as the victim of a gang around Marsalek and Oliver Bellenhaus. He accuses them of diverting large sums of money from the Wirecard Group via letterbox companies abroad.

Attorney Dierlamm also filed for court proceedings to be suspended shortly after the start of the lawsuit in December. As a reason, he stated that the public prosecutor's office is constantly sending extensive new files to the parties involved in the process. The number of files for this process has now grown to 870 folders. A court spokesman said on January 18 that the Criminal Division wanted to decide “promptly” on Dierlam's request.

The coming weeks and months are therefore likely to resemble a Wirecard economic crime story, which should also have far-reaching consequences for supervisory authorities such as BaFin. This is because the careless conduct of EY and BaFin has at least facilitated the Wirecard scandal and shows that the previous control system is reaching its limits when it comes to detecting balance sheet manipulations.

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