Growing Suspicion of Accounting Fraud at German Fintech Company Wirecard: "Where Are the 1.9 Billion Euros?"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The German fintech group Wirecard, which has been under suspicion of accounting fraud since last year, reportedly cannot confirm the whereabouts of 1.9 billion euros (approximately 2.6 trillion KRW) in cash that it claimed to hold in its accounts, according to the accounting audit firm in charge on the 18th (local time). Wirecard, which had expanded its business enough to be included in Germany's DAX30 index since 2018, saw its stock price plummet by more than 60% in a single day due to the accounting fraud controversy.

According to Deutsche Welle and others, the accounting firm Ernst & Young (EY) informed Wirecard that after reviewing hundreds of billions of euros worth of credit transactions and bank accounts, there is insufficient accounting evidence to confirm that the 1.9 billion euros should be in reliable accounts.

Headquartered in Munich, Germany, Wirecard is a multinational electronic payment service company providing mobile and online payment and credit card issuance services to corporate clients worldwide. It operates in 26 countries, including Europe, Africa, Asia, Australia, North America, and Latin America.

The accounting fraud allegations against Wirecard surfaced through the media last year. In January of last year, suspicions arose that Wirecard's Singapore office had inflated its revenue, and in October of the same year, allegations emerged that Wirecard employees had significantly overstated the sales and profits of subsidiaries in Dubai and Dublin, Ireland. Wirecard initially denied these claims, but as suspicions persisted, EY, which was responsible for the company's accounting audit, conducted a related investigation.

As a result of the investigation, EY revealed discrepancies in Wirecard's cash held in escrow accounts at two banks in the Asia region. Although 1.9 billion euros should be in the accounts as part of risk management related to business owners during operations, it is difficult to verify this. Wirecard stated that EY said, "There are signs that the previously provided balance confirmations were false," and "This misled the accounting firm and caused a misunderstanding about the cash balance."

However, Markus Braun, Wirecard's CEO, claimed that they might be the victims. He emphasized, "At this point, it is unclear whether fraudulent transactions occurred," and stated that the 1.9 billion euros are held by investment-grade banks and managed by trustworthy trustees.

Regarding this, EY requested the two Asian banks to confirm whether the funds were in the accounts at the time last year, but Wirecard said the banks refused this request.

Immediately after the announcement, Wirecard's stock price plunged more than 60% on the Frankfurt Stock Exchange in Germany. Consequently, Wirecard's corporate value, which was 24 billion euros when it was included in the DAX30 index in 2018, has drastically decreased to 5 billion euros as of this date. Wirecard stated, "The board of directors is working intensively with the accounting firm to explain the situation."

Due to this issue, Wirecard is now facing the immediate risk of loan recalls. The company has postponed its earnings announcement three times since March last year due to the accounting fraud issue. The company stated that since the accounting fraud has been directly confirmed, it has become even more difficult to disclose earnings immediately, and the 2 billion euros worth of loans currently held may expire.

This content was produced with the assistance of AI translation services.