Wirecard has filed for insolvency, which means the company is unable to pay its debts. This move by Wirecard is the latest event to unfold from the accounting scandal surrounding the digital currency debit card issuer for Crypto.com and TenX.
A series of unfortunate events
Wirecard’s troubles began when Ernst & Young (EY) discovered that €1.9 billion ($2.1 billion), approximately a quarter of the consolidated balance sheet total, and roughly 80% of Wirecard’s net cash, was missing from the company’s funds.
After the news broke about Wirecard’s missing funds, former Wirecard CEO Markus Braun resigned. Shortly after Braun resigned from Wirecard, prosecutors in Munich issued a warrant for Braun’s arrest due to suspicion of Braun “inflating the digital payment company’s balance sheet and sales through fake transactions in order to make [Wirecard] more attractive to investors and customers.” After the warrant was issued, Braun turned himself in and remained in custody for a period of time before he was released after posting €5 million in bail.
At first, Wirecard implied that they may have had the funds located somewhere and that the discrepancy between the funds reported on their consolidated balance sheet and the funds that they actually had on-hand may have been due to human error. However, as time went on, Wirecard published a press release admitting that there was a high probability that the missing funds do not exist.
What’s next for Wirecard?
Wirecard filing for insolvency most likely signifies the beginning of the end of the company’s accounting scandal; legal action against Braun, and possibly a few other employee’s will most likely follow.
The company, which is publicly traded on the Frankfurt Stock Exchange, had its shares suspended from trading shortly before news of their filing for insolvency was made public. However, shares of Wirecard are trading once again and the stock has plunged over 70%.
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