Markus Braun, the former chief executive of Wirecard was recently taken into custody by Munich prosecutors on “suspicion of having inflated the digital payment company’s balance sheet and sales through fake transactions in order to make [Wirecard] more attractive to investors and customers.”
Wirecard’s demise
The firm’s auditor Ernst & Young (EY) recently discovered that “no sufficient audit evidence could be obtained 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).”
EY found that Wirecard did not have €1.9 billion ($2.1 billion) of the wealth that they reported they had on their balance sheet. At first, Wirecard questioned the origin of those transactions; however, in Wirecard’s latest press release, they say that “there is a prevailing likelihood that the bank trust account balances in the amount of 1.9 billion EUR do not exist,” which means there is a strong chance that the €1.9 billion was indeed fabricated.
Braun resigned before he was arrested
In what was most likely a move by Wirecard to save the publicly-traded company from collapsing, Braun resigned from Wirecard effective immediately on June 19, and was replaced by interim CEO James H. Freis.
At the moment, it is not clear whether or not Braun remains in custody. At the time of his arrest, prosecutors said that Braun would be released on bail of €5 million ($5.7 million).
But regardless of whether or not Braun is in custody, or whether or not Braun will be found guilty, Wirecard, the digital currency debit card issuer for Crypto.com and TenX, is down by over 80% from the time the news broke about their inflated balance sheet.
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