Last December I wrote a blog post expressing concern about the high-flying fintech company Wirecard AG. There were too many red flags, I thought then. The Financial Times also believed there was possible fraud in the financial statements Wirecard was presenting to investors. I have lived through many spectacular cases of fraud - Enron, WorldCom, Balsam AG, etc. - and something about Wirecard smelled fishy.
Now, my concerns turned out to be justified. The Wall Street Journal today reports:
"The company said the auditor informed it that “no sufficient audit evidence could be obtained” on the €1.9 billion that was supposed to be held in trust accounts. The amount in question equals about one-quarter of the value of Wirecard’s balance sheet. Wirecard processes electronic payments for retailers, especially online, and provides related services and loans. It was seen as a great success in Germany’s corporate scene, with high exposure to rapid growth in Asian markets. In 2018, Wirecard’s market value eclipsed that of Deutsche Bank AG , the country’s largest lender. The €1.9 billion is meant to be held in accounts looked after by a trustee on behalf of Wirecard and payment-processing partners in some countries. Problems with obtaining evidence about these balances were raised by KPMG in a recent special report into allegations about Wirecard’s accounting practices, published in April."
Naturally, Wirecard management is claiming it is the victim here (!), which will surely enrage investors:
Der Konzern will nun Strafanzeige gegen unbekannt erstatten. Das Unternehmen sieht sich laut einem Sprecher als mögliches Opfer eines "gigantischen Betrugs": Es gebe Hinweise, dass dem Abschlussprüfer von einem Treuhänder oder aus dem Bereich von Banken, die die Treuhandkonten führen, "unrichtige Saldenbestätigungen zu Täuschungszwecken vorgelegt wurden".
Only question now is will Markus Braun end up in prison like the fraudsters at Enron, WorldCom, Balsam, etc. who came before him?
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