Wirecard ex-boss under arrest as firm implodes

The payment service provider Wirecard is accused of market manipulation, and its collapse has led to calls for a tightening of regulations. (AP)
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Updated 24 June 2020

Wirecard ex-boss under arrest as firm implodes

  • Creditors hunt for lost billions as company reveals $2.1bn financial hole

MUNICH: Wirecard’s former boss has been arrested on suspicion of falsifying its accounts, after the German payments firm disclosed a $2.1 billion financial hole and questioned whether trustees had actually held money on its behalf.

Markus Braun turned himself in on Monday night after Munich prosecutors issued a warrant for his arrest. A judge ruled on Tuesday that the 50-year-old Austrian could be released as soon as he posts €5 million ($5.7 million) in bail.

In his 18 years in charge, Braun transformed an offshoot of the dot.com boom, known for handling payments for online gambling and adult entertainment sites, into a $20 billion-plus “fintech” that won a place in Germany’s blue-chip DAX index.

The former consultant traded in a suit for a black roll-neck and portrayed himself as a tech visionary, telling New York investors last autumn that Wirecard would increase revenues by six times by 2025 as digital payments boom.

Wirecard’s meteoric rise was, however, accompanied by repeated allegations from whistleblowers, journalists and speculators that its revenue and profits had been pumped up through fake transactions with obscure partners.

Braun, who will have to report to police once a week, said last week in a video statement that Wirecard may have been the victim of fraud, without giving details.

He now stands accused of misrepresenting Wirecard’s accounts and of market manipulation by falsifying income from transactions with so-called third-party acquirers, the Munich prosecutor’s office said earlier.

Two people familiar with the matter said state prosecutors were also considering issuing an arrest warrant for Jan Marsalek, a board member fired on Monday. Lawyers for Braun and Marsalek were not available for comment.

Wirecard’s implosion was described on Monday as a “total disaster” by Germany’s financial regulator, who has come under fire for pursuing its critics and not the company. Finance Minister Olaf Scholz told Reuters on Tuesday that lawmakers should decide quickly how to tighten regulation following the Wirecard scandal, which had exposed lapses by both auditors and regulators.

An external audit by KPMG in April could not verify cash balances, questioned Wirecard’s acquisition accounting and was unable to trace millions in reported cash advances to merchants.

Braun, who said at the time that the allegations were not confirmed “in every point,” quit on Friday after in-house auditor EY refused to sign off on Wirecard’s 2019 accounts.

Wirecard’s shares have since shed more than 80 percent and its only listed bond is trading at 26 cents on the euro, indicating that investors expect to lose most of their money.

New CEO James Freis, a former financial investigator at the US Treasury and compliance chief at the Frankfurt Stock Exchange, has opened urgent talks with 15 banks that have lent € 1.75 billion to Wirecard.

With Wirecard having failed to file audited financials, the banking consortium led by Germany’s Commerzbank could call in the loans at any time.

Sources close to the talks said it was doubtful that Wirecard can continue as a going concern, while risks of litigation ruled out asset sales for now.

The main question is whether to allow the firm to keep operating for a couple of weeks, to allow more time to recover money, one source familiar with the talks said.

More than 5,000 staff are due to be paid at the end of June, and bankers would decide before then whether to pull the plug and trigger insolvency, the source added.

Wirecard is being advised by investment bank Houlihan Lokey and the creditors by law firm Allen & Overy. Both declined comment.


Fishing rights top Brexit talks agenda

Updated 30 November 2020

Fishing rights top Brexit talks agenda

  • A no-deal scenario is widely expected to cause economic chaos

LONDON: Last-ditch Brexit trade talks continued in London on Sunday with fishing rights remaining an “outstanding major bone of contention,” according to British Foreign Minister Dominic Raab.

EU chief negotiator Michel Barnier told reporters that “work continues, even on a Sunday,” as he arrived for the second day of talks.

Barnier had arrived in London on Friday following a spell in self-isolation after a member of his team contracted coronavirus and ahead of the resumption of talks with British counterpart David Frost on Saturday.

Both men warned that a deal could not be reached without major concessions from the other party.

There are only five weeks to go until the end of the current transition period, during which trade relations have remained largely unchanged.

The two key sticking points remain post-Brexit access to British fishing waters for European vessels and the EU’s demand for trade penalties if either side diverges from common standards or state aid regulations rules.

Raab told Sky’s Sophy Ridge on Sunday that this could be the final week of “substantive” talks, with time running out to agree and ratify a deal.

“There’s a deal to be done,” he said.

“On fishing there’s a point of principle: As we leave the EU we’re going to be an independent coastal state and we’ve got to be able to control our waters,” he added.

Barnier told envoys last week that London was asking that European access to UK waters be cut by 80 percent, while the EU was willing to accept 15 to 18 percent, according to a Brussels source.

A British official called the demands “risible,” according to the domestic Press Association, adding that the “EU side knows full well that we would never accept this.”

“There seems to be a failure from the Commission to internalize the scale of change needed as we become an independent nation,” said the source.

However, Raab was cautiously optimistic over the “level playing field” issue, saying “it feels like there is progress toward greater respect” for Britain’s position.

A failure to reach an agreement would see Britain and the EU trading on World Trade Organization terms, with tariffs immediately imposed on goods traveling to and from the continent.

As it stands, Britain will leave Europe’s trade and customs area on Dec. 31, with no prospect of an extension.

A no-deal scenario is widely expected to cause economic chaos, with customs checks required at borders.

Concern is particularly acute on the border between EU member Ireland and the British province of Northern Ireland, where the sudden imposition of a hard border threatens the delicate peace secured by 1999’s Good Friday Agreement.

The talks have already dragged on much longer than expected and time is running out for ratification of any deal by the European Parliament by the end of the year.