Scandal and insolvency
Beginning in April 2015, the Financial Times blog FT Alphaville wrote a series of blog posts that questioned Wirecard's business model and criticised the company's accounting practices.[31]
In February 2016, the 101-page "Zatarra Report"[32] appeared, documenting alleged fraud and money laundering at Wirecard. It was co-written by British short sellers Fraser Perring of Viceroy Research and Matthew Earl of ShadowFall, who sent the report to the German financial agency BaFin. On the urging of Wirecard, BaFin and Bavarian prosecutors then initiated criminal investigations against Perring and other short sellers for market manipulation. The cases were dropped in March 2020.[33] In February 2017, the German Manager Magazin published a lengthy article about Wirecard in which it alleged misleading reporting practices.[13]
On 30 January 2019, Wirecard shares plunged after the Financial Times reported that a senior executive was suspected of "falsification of accounts" and "money laundering" and round-tripping in the company's Asia-Pacific operations.[34] Wirecard issued a statement calling the report "false, inaccurate, misleading and defamatory".[35] Wirecard also announced a lawsuit against the Financial Times for "unethical reporting" and a lawsuit for market manipulation.[36][37]
The public prosecutor's office Munich I in February 2019 launched criminal investigations against Financial Times journalist Dan McCrum because of alleged violations of the German Securities Trading Act (Wertpapierhandelsgesetz, WpHG).[38] The German Federal Financial Supervisory Authority BaFin banned short selling Wirecard shares on 18 February 2019 until 18 April 2019. According to BaFin, the measure was not meant to take sides in the controversy between Wirecard and the Financial Times.[39] On 15 October 2019, the Financial Times published documents which it claimed to be Wirecard's internal accounting spreadsheets.[40]
In 2019, the accounting firm KPMG was hired by Wirecard for an independent audit to address the mentioned allegations. In March 2020, Wirecard claimed that KPMG concluded that no discrepancy was determined during the audit.[41] However, on 28 April 2020 the auditor KPMG announced that it had not received sufficient documentation to address all allegations of accounting irregularities, with Wirecard shares tumbling 26%.[42] London Based Hedge-Fund TCI and others shortsellers like Armin S. filed criminal complaints against Wirecard.[43][44] On 5 June, Wirecard's headquarters were searched by police as part of a criminal investigation into potentially misleading statements to investors by CEO Markus Braun and three other board members regarding the audit.[45] The company then reported on 18 June 2020 that €1.9 billion was missing in cash from the company's accounts, this following an audit by Ernst & Young.[46]
In January 2020, Wirecard announced that a contract extension would be offered to chief executive Markus Braun.[51][52] At the same time, its long-time chairman stepped aside. In April, an auditor found questionable accounting practices. According to auditing firm Ernst & Young, a trustee of Wirecard tried to "deceive the auditor", resulting in the bank processor being unable to release the share results for 2019. In a statement, Wirecard announced that it was "working intensively together with the auditor towards a clarification of the situation".[53]
In June 2020, it was revealed that €1.9 billion was "missing". As a result, Wirecard's share value decreased by over 72%, and its CEO, Markus Braun, resigned.[54] Wirecard appointed James Freis to the position on an interim basis. Freis had only joined the company the evening before. A few days later, the management board stated that the €1.9 billion amount likely did not exist.[55] Two banks in the Philippines who were allegedly holding the money said that they did not have the sum and never did.[56] The firm's Moodys credit rating was demoted to B3 on 19 June 2020, before this rating was removed entirely 3 days later.[57]
A criminal investigation began on 22 June 2020;[58] Wirecard's recently resigned CEO, Markus Braun, was arrested the same day.[59] On 25 June, Wirecard filed for bankruptcy, citing "over-indebtedness".[60] On 25 August 2020, the firm's administration axed the contracts of its chief executive manager as well as two additional managers. Furthermore, 730 company staff were also cut.[61] In September 2020, the German parliament announced that it would organize an inquiry in order to fully investigate the reasons why the government failed to prevent the corporate fraud.[62]
The UK Financial Conduct Authority froze the activities of Wirecard's British subsidiary, Wirecard Card Solutions Limited, between 26 June 2020 and 30 June 2020, after which Wirecard UK operations were allowed to resume, albeit with restrictions.[63][64] Singapore's central bank, the Monetary Authority of Singapore (MAS), announced in September 2020 that it has directed Wirecard's Singapore branch to stop their payment services there, and return all funds owed, in light of the company's insolvent business and inability to continue providing payment services in Singapore.[65]
A report published in June 2020 by the interdisciplinary journalism laboratory Citizen Lab at the University of Toronto stated that persons and organisations publicly critical of Wirecard had been the target of sustained hacking and phishing attempts by a hackers-for-hire group dubbed Dark Basin. According to the report, some of the critical entities, which included hedge funds, short sellers, investigators, and journalists, were "targeted almost daily for months, and continued to receive messages for years". The report linked the attacks "with high confidence" to the Indian company BellTroX InfoTech which has a history of other hacking-for-hire operations.[66][67] U.S. prosecutors in New York and the FBI reportedly started an investigation into the hacker-for-hire allegations.[68] Wirecard denied any wrongdoing.[66]
On 20 May 2021, Pav Gill, Wirecard's senior legal counsel based in Singapore who looked after all legal aspects of Wirecard's business and operations in the Asia-Pacific region, revealed himself to be the whistleblower who provided the material exposing the fraud to the Financial Times.
During June 2023, Singapore's State Court sentenced James Wardhana, Wirecard's international finance manager to 21 months and Chai Ai Lim, Wirecard Asia's Head of Finance, to 10 months of imprisonment.[69]
In January 2026, a Singaporean court sentenced R Shanmugaratnam and James Henry O’Sullivan to 10 and 6.5 years in prison respectively for falsification of accounts related to Wirecard. Shanmugaratnam ran Citadelle Corporate Services in Singapore and issued false confirmation letters for O’Sullivan, claiming that Citadelle held 1.1 billion EUR for Wirecard in various accounts.[70]
