Few days after claiming the missing $2.1 billion was no longer missing, German payments company Wirecard said on Thursday it was filing to open insolvency proceedings after disclosing a $2.1 billion financial hole in its accounts.
Shares of Wirecard were suspended before the announcement by the Frankfurt Stock Exchange. They have lost more than 90% of their value since auditor EY refused to sign off on the 2019 accounts, leading to the resignation of long-time CEO Markus Braun.
Yesterday, the former Chief Executive of Wirecard, Markus Braun was detained by police in Germany.
Prosecutors in Germany said he is being detained on accusations of inflating the company’s balance sheet and revenues to make it appear stronger and more attractive for investors and customers, prosecutors said in a statement on Tuesday.
Yesterday, Wirecard said on Monday that 1.9 billion euros ($2.15 billion) it had booked in its accounts likely never existed, a black hole that threatens to engulf the payments company.
Authorities who spoke to Reuters said Braun turned himself in on Monday evening and will be presented to a judge on Tuesday who will decide on whether he will remain in custody.
The company said it is withdrawing its full-year 2019 and first quarter 2020 financial results.
“The Management Board of Wirecard assesses on the basis of further examination that there is a prevailing likelihood that the bank trust account balances in the amount of 1.9 billion EUR do not exist,” the company said in a statement.
Wirecard also said in the statement that the company is examining a range of possible measures to ensure continuation of its business operations, which include cost reductions, restructuring, disposal or termination of business units.
As the heat of missing money scandal became hot for the company, Chief Executive Officer Markus Braun quit last Friday as the missing cash hit a dead end in the Philippines and Wirecard scrambled to secure a financial lifeline from its banks.
It would be recalled that the central bank of the Philippines said on Sunday that none of the $2.1 billion missing from the Wirecard appeared to have entered the Philippine financial system.
See the full statement on the missing money denial below:
The Management Board of Wirecard assesses on the basis of further examination that there is a prevailing likelihood that the bank trust account balances in the amount of 1.9 billion EUR do not exist. The company previously assumed that these trust accounts have been established for the benefit of the company in connection with the so called Third Party Acquiring business and has reported them as an asset in its financial accounts. The foregoing also causes the company to question the previous assumptions regarding the reliability of the trustee relationships.
The Management Board further assesses that previous descriptions of the so called Third Party Acquiring business by the company are not correct. The Company continues to examine, whether, in which manner and to what extent such business has actually been conducted for the benefit of the company.
Wirecard withdraws the assessment of (i) the preliminary results of the financial year 2019 (revenue and earnings before interest, taxes, depreciation and amortization (EBITDA)) of 14 February 2020 (last confirmed on 18 June 2020), (ii) the preliminary results of the first quarter of 2020 (revenue and EBITDA) of 14 May 2020, (iii) the EBITDA prognosis for the financial year 2020 of 6 November 2019 (last confirmed on 14 May 2020) and (iv) the Vision 2025 prognosis for the financial year 2025 on transaction volume, revenue and EBITDA of 8 October 2019. Potential effects on the annual financial accounts of previous years cannot be excluded.
Wirecard continues to be in constructive discussions with its lending banks with regard to the continuation of credit lines and the further business relationship, including the continuation of the current drawing coming due at the end of June. Together with the renowned and internationally active investment bank Houlihan Lokey, Wirecard is assessing options for a sustainable financing strategy for the company.
In addition, the Company is examining a broad range of possible further measures to ensure continuation of its business operations, including cost reductions as well as restructuring, disposal or termination of business units and products segments.
For the avoidance of misunderstandings, the company wishes to inform that its IT systems continue to work without limitations.