Wirecard AG, one of the most prominent gambling payment processors in Europe is on the spot after the company management disclosed that about $2 billion in cash had gone missing from its balance sheet. Last week, the company filed for insolvency proceedings, becoming the first insolvent entity in Germany’s premier stock-market index, the DAX 30. Before all the chaos that is now shaking Wirecard AG to its core, it had been one of the hottest fintech success stories that managed to brush off several accounting fraud allegations.
This scandal eventually led to the resignation and detention of Markus Braun, the Chief Executive Officer of Wirecard for the charge of cooking books and falsifying data on the company’s balance sheet. Braun had led the company for the past 18 years and he was responsible for the company’s biggest milestones, including the listing on DAX 30 index. From how things are unfolding however, it appears that Braun had supposedly managed to hoodwink everyone about Wirecard’s financial health.
Where is the Missing Money?
Recent reports from Wirecard itself indicated that the money was allegedly held in two Philippines banks; Bank of the Philippine Islands (BPI) and BDO Unibank Inc. But then, Benjamin Diokno, the Central Bank Governor of the Philippines disclosed that the two banks in question had denied any association with Wirecard.
The two banks went ahead to discredit the authenticity of the documents linking them to the missing money, asserting that the evidence tying them to Wirecard may be an inside job fabrication. Moreover, the Philippines further demanded the presence of Jan Marsalek, the former Chief Operating Officer of the company, before the country’s officials to get to the bottom of the matter.
Owing to the recent turn of events, the company’s stock is now lingering at slightly over $2 as we speak, plunging from over $112 a week ago. Unfortunately, investors who did not manage to cash out fast enough have lost millions of dollars. Even worse, what adds fuel to the fire that’s currently ravaging Wirecard is the fact that the company is looking at a total of about $4 billion in debt.
UK’s FCA Suspends all Wirecard Services and Transactions
Following Wirecard’s woes, the United Kingdom’s Financial Conduct Authority (FCA) moved to enforce a range of restrictions. The FCA issued a regulatory notice forbidding the company from carrying out any activities in the UK’s regulated market. On top of that, the fintech company is also restricted from disposing of any funds or assets until all insolvency investigations are complete.
In its notice, the FCA also issued guidance for clients who had stored funds with Wirecard agents based within the EAA (European Economic Area) and overseas, further stating that funds held by the agents will no longer have FSCS (Financial Services Compensation Scheme) protection. Besides, the fintech firm has been compelled to relay all the FCA restrictions to its users and affiliates. UK users, merchants, and clients are however allowed to withdraw from Wirecard UK, with FCA oversight.
A Fall From Grace
Wirecard was founded back in 1999 and in less than a decade, it had established one of the most comprehensive networks for processing payments across casino and sports betting platforms. The firm had grown to become one of the most popular payment processors, favored by a host of tier-1 brands across regulated betting markets in Europe.
On top of the insolvency filing, the former darling of the fintech industry has now filed for court protection against its creditors, with more arrests of executives, auditors, and banking officials pending. All eyes are now on Germany’s financial industry, with a lot of questions on how the deceitful company managed to get the prestigious seat on the DAX 30 high table, alongside giants such as SAP, BMW, and Adidas.