German financial services provider Wirecard has come up $2.1 billion short in its recent audit.
The company’s auditor, Ernst & Young, discovered that “no sufficient audit evidence could be obtained so far of cash balances on trust accounts to be consolidated in the consolidated financial statements in the amount of €1.9 billion (approximately a quarter of the consolidated balance sheet total).”
Wirecard’s actual wealth and the wealth reported on their consolidated balance sheet differed by over $2 billion—roughly 25% of the assets listed on their consolidated balance sheet. As a result, Wirecard has postponed its 2019 financial statements for the fourth time this year. If the company fails to publish its 2019 financial statement by Friday, June 19, then banks that have offered Wirecard a total of €2 billion in loans have the option to terminate their loan offer.
Wirecard digital currency clients
Wirecard is the digital currency debit card issuer for Crypto.com and TenX. Both companies offer a digital currency debit card that allows its users to spend their funds as if they were fiat at any retailer that accepts Visa. Despite the negative news regarding Wirecard’s missing funds, Wirecard’s digital currency clients say that they are unaffected.
Facts: debit cards issued by Wirecard for https://t.co/pFc4PzqqHR are fully prefunded. These client fiat funds are held by an EMI institution regulated by UK FCA in segregated client accounts. The funds are held at another bank (not Wirecard) as required by the FCA. (1/2)
— Kris | Crypto.com (@Kris_HK) June 18, 2020
Crypto.com CEO Kris Marszalek said their clients’ cards are pre-funded and held by an EMI institution regulated by the U.K. Financial Conduct Authority in segregated client accounts.
Marszalek says that funds are held at another bank (not Wirecard) as required by the FCA. In other words, all Wirecard does for Crypto.com is provide the physical card and facilitate the service, they do not, however, have control or access to any of Crypto.com’s customer funds.
Regardless of whether or not Wirecard’s financial troubles affect its digital currency clients directly, the recent accounting scandal does raise the question of whether or not its digital currency clients will switch card providers.
Wirecard’s accounting troubles are the latest allegation against the German company. In the past, Wirecard has endured a slew of allegations that claim the company fraudulently inflated sales and profits.
Shares of Wirecard, which are listed on the German stock exchange (DAX), plunged by over 60% following the news.
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