"The higher you go, the harder will be the fall": this proverb, a bit cliché, has rarely been adapted: Wirecard, German financial services giant, filed for bankruptcy on Thursday. The reason: a hole of… two billion euros in his accounts! At the end of a completely crazy week, this company, unknown to the general public but essential in the world of new technologies, experienced the epilogue of its descent into hell. Story of an incredible story, a scandal like only the world of finance can create.
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From start-ups to global giant
Founded in 1999 in Munich, Wirecard was originally a start-up specializing in securing online transactions for businesses. In other words, it guarantees and insures, for businesses, payments made on the Internet by consumers. By the way, she cashes a commission, the foundation of her economic model. In the 2000s, the start-up took advantage of the boom in e-commerce and the inability of traditional banks to ride the wave to become a global giant, with some 300,000 corporate clients.
At the end of 2018, Wirecard went public and, as a symbol, it bottled the Commerzbank out of the Dax (the German stock market index). It is then valued at 23 billion euros, making it the third German financial group, ahead of the venerable Deutsche Bank. At the start of 2019, the two companies have a comparable capitalization, around 17 billion euros. Except that Wirecard operates with 15 times less employees and turnover.
A descent into hell by stage
That's when the trouble begins. The Financial Times published three articles in a few weeks, accusing in particular Wirecard of having manipulated the group's balance sheet to inflate the volume of its operations in Asia. The leaders deny the accusations but the bubble is burst: the stock price unscrews (-40% in three months), the accounts are combed and the Singapore police open an investigation. In October, the Financial Times handed over a layer with new revelations on "suspicious accounting practices" at Wirecard, this time in the Gulf.
In the months that followed, two renowned audit firms (EY and KPMG) cast doubts on Wirecard's accounting and refused to certify its accounts. The German financial regulator, Bafin, followed suit and filed a complaint with the Munich public prosecutor's office, which opened an investigation in early June. Everything is in place for the last act: the fall. Worried about the possible fallout, investors leave the ship: in one week, the Wirecard title loses more than 90% of its value.
Finally, Monday, Wirecard acknowledges the existence of a huge internal financial fraud: 1.9 billion euros in its accounts have evaporated in the Philippines. This colossal sum "most probably does not exist", admits the group. The next day, the historic boss of Wirecard, Markus Braun, surrenders to the authorities. He admits to having "inflated" the balance sheet of the company to "make it more attractive for investors and customers". Arrested and charged, he was released on bail of five million euros. Deserted by all its financial backers, the group ends up filing for bankruptcy Thursday, under "the threat of insolvency and over-indebtedness".
Wirecard, a "scandal without equivalent"
In the hours that followed, the EY firm, in charge of auditing Wirecard's accounts, announced that it saw "clear indications of a large-scale fraud, involving several parties in the world and various institutions, with a desire to deceive" . The German Minister of Finance, for his part, spoke of "scandal without equivalent in the financial world". The case provokes a lively debate across the Rhine on the very flexible control to which technological companies like Wirecard are subjected. "Such a scandal must be a red flag showing that we need more control," said Olaf Scholz.
In fact, Brussels asked the European Financial Market Supervisory Authority to conduct a preliminary investigation into the handling of the Wirecard case by the German finance gendarme. As for the judicial investigation, it follows the money trail. Justice is interested in the business lawyer Mark Tolentino, presented by the German press as the one who operated as a fiduciary agent on behalf of Wirecard, within the Philippine financial center of Makati City. But he claims to be a victim of identity theft. Philippine justice, it is actively looking for a former director of the group, Jan Marsalek, who could be on Filipino soil.