Police raid Wirecard HQ as administrator kicks off asset sales

FRANKFURT (Reuters) – Police and public prosecutors raided Wirecard’s headquarters in Munich and four properties in German and Austria on Wednesday as they widened their investigation into the financial payments company that collapsed last week.

Wirecard filed for insolvency last week owing creditors almost $4 billion after disclosing a 1.9 billion euro ($2.1 billion) hole in its accounts that its auditor EY said was the result of a sophisticated global fraud.

The implosion of a financial technology company once seen as one of the hottest prospects in Europe has led to political finger-pointing in Germany and new investigations into potential financial skullduggery from the Philippines to Mauritius.

German prosecutors said on Wednesday they were widening their investigation to include suspected fraud, in addition to market manipulation and falsifying of accounts.

They are also now investigating Wirecard’s Chief Financial Officer Alexander von Knoop and Chief Product Officer Susanne Steidl, in addition to former Chief Executive Markus Braun and operations boss Jan Marsalek.

None of the four could immediately be reached for comment.

Braun, who is Austrian, was arrested last week and released on bail. Germany has issued an arrest warrant for Marsalek, who was last believed to be in the Philippines. His lawyer declined to comment. Von Knoop and Steidl were still working for Wirecard, according to recent information from the company.

In parliament, the head of Germany’s financial regulator BaFin defended its record in the face of criticism that its supervision of Wirecard was lax.


BaFin, which oversaw Wirecard’s banking subsidiary, has taken most of the flak for the scandal so far. Sources have told Reuters that regulators discussed labelling Wirecard a financial holding company in 2017 and 2019, which would have allowed BaFin greater scrutiny, but took no action.

BaFin President Felix Hufeld told lawmakers in a closed-door session the decision not to change Wirecard’s status was taken with the Bundesbank and European Central Bank (ECB), according to his spokeswoman, who stressed Hufeld did not blame the ECB.

The ECB declined to comment.

The central bank and financial services regulator in Mauritius said on Wednesday they had launched an investigation into whether Wirecard was linked to “round-tripping” with an entity registered in the offshore African financial centre.

Round-tripping is a kind of accounting fraud that entails booking fake transactions with counterparties that appear to be at arms length but are not, and is typically undertaken by companies seeking to inflate reported revenues.

Wirecard’s administrator Michael Jaffe, meanwhile, has started scouting for potential buyers of the company’s assets to recoup some money for creditors. He said investors from around the world had contacted him already.

Wirecard’s U.S. subsidiary – which was Citi Prepaid Card Services before Wirecard bought it in 2016 – has already been put on the block.

Investment banking boutique Moelis has been hired to find a buyer for the U.S. business while Alvarez & Marsal is sounding out interest in Wirecard’s UK subsidiary, according to people familiar with the matter.

Alvarez & Marsal declined to comment while Moelis was not immediately available for comment.

“For any buyer, the most interesting aspect may be Wirecard’s customer list and the contracts for processing payments for credit card firms,” one investment banker said.


Wirecard, which was founded in 1999, started out handling payments for gambling and adult websites and now processes payments for major global companies including Visa and Mastercard.

Jaffe has started marketing Wirecard’s assets to rivals such as Ingenico, Adyen, Worldline and Nets, as well as to banks and private equity groups, though time was of the essence, people familiar with the matter said.

“Key customers and employees are starting to turn their backs on Wirecard, significantly reducing its value. If Visa and Mastercard pull out it’s game over,” one of the people said.

While some of the operating assets were expected to find new homes, the fate of Wirecard’s bank – which has been ring-fenced to prevent any outflow of cash – remains unclear.

“Wirecard Bank is still not insolvent. Payouts to merchants and customers of Wirecard Bank are being executed without restrictions,” the administrator said.

While the administrator may recover some money from selling Wirecard’s assets, some creditors are losing patience.

British bank Lloyds sold a 120 million euro tranche of Wirecard’s revolving credit facility to 10 investors at about 17 cents on the euro, a person close to the matter said, adding that others creditors were also trying to offload loans.

German asset manager Union Investment, which had big investment in Wirecard, followed other investors in saying it was considering legal action.

Wirecard bondholders are also discussing whether or not they can take legal action against the banks that organised the sale of the securities, according to a source close to the investors.

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Wirecard HQ raided by police as fraud probe gathers pace

Police and prosecutors have raided the headquarters of beleaguered payments firm Wirecard as part of a fraud investigation relating to its £1.7bn accounting black hole.

Officials from Munich carried out searches at four other properties in connection with the company’s activities, according to prosecutors.

They told Reuters they were investigating three other members of the board, in addition to former chief executive Markus Braun who resigned last month after the missing money was disclosed to the market.

A spokeswoman, the news agency reported, identified the three as Alexander von Knoop, Jan Marsalek and Susanne Steidl.

Mr Marsalek is a former director.

They are yet to comment on the developments and there is no detail on any specific allegations.

Wirecard filed for insolvency last month – the first member of Germany’s prestigious DAX share index to do so – but has continued to trade since.

The scandal has resonated across Europe.

It prompted the UK’s City watchdog to secure a freeze on Wirecard’s UK arm, Wirecard Card Solutions, which was said to have prevented thousands of customers from using their payment cards.

The precautionary restriction was introduced on Monday to protect the interests of consumers but lifted the following day.

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Wirecard North America seeks buyer, distances itself from German company

(Reuters) – Wirecard North America Inc, a unit of German payments company Wirecard AG (WDIG.DE), on Monday said it has put itself up for sale, days after the troubled parent firm filed for insolvency. The U.S.-based unit, which was bought by Wirecard in 2016, said an investment bank is coordinating the sale process. The unit was formerly known as Citi Prepaid Card Services.

It did not provide further details but said Wirecard North America is a separate legal and business entity of Wirecard and is “substantially autonomous” from the German company, adding that it remains “self-sustaining”.

Last week, Wirecard filed for insolvency owing creditors almost $4 billion after disclosing a 1.9 billion euro ($2.14 billion) hole in its accounts that its auditor EY said was the result of a sophisticated global fraud.

The company said on Saturday it would proceed with business activities after the insolvency filing and an administrator was appointed on Monday.

($1=0.8895 euros)

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Wirecard collapse puts German watchdog in EU crosshairs

BRUSSELS/LONDON (Reuters) – The European Commission in a rare move has asked its markets watchdog to investigate German financial regulator BaFin over the collapse of payments company Wirecard .

The company’s implosion on Thursday owing creditors almost $4 billion is shaping up to be one of Germany’s biggest corporate scandals.

The financial technology company, which disclosed a gaping $2.1 billion hole in its books, is the first member of the DAX stock index to go bust, barely two years after winning a spot among Germany’s top 30 listed companies.

Wirecard’s long-time auditor, EY, said the hole in the company’s books was the result of a sophisticated global fraud.

The EU executive said in a letter to the European Securities and Markets Authority (ESMA) that its “fact-finding analysis” should assess if BaFin’s responses to allegations of improprieties, and to a critical report from auditors KPMG in April, were adequate to protect investor confidence in EU markets.

KPMG said it was unable to verify 1 billion euros in cash balances, questioned Wirecard’s acquisition accounting and said it could not trace hundreds of millions of euros in cash advances to merchants in a review it published in April.

The Commission said it also wants ESMA to assess if there is any evidence of “administrative or legal obstacles” that hampered the enforcement of reporting requirements.

Allegations of financial impropriety have swirled around Wirecard for years and its implosion has triggered calls for an overhaul of corporate supervision and heaped pressure on BaFin boss Felix Hufeld, who has described the scandal as a “total disaster”.

BaFin could not be reached for immediate comment on Friday.

“At this stage, this preliminary analysis should seek to establish a comprehensive description and assessment of the events,” the Commission said in a letter, adding it should be concluded no later than July 15.

It said this should include “the adequacy of the supervisory response to these events, leading to the collapse of Wirecard AG.”

ESMA confirmed it had been asked to look at how BaFin enforced the EU’s transparency directive which covers financial reporting requirements for listed companies.

EU financial services chief Valdis Dombrovskis could use the findings from ESMA’s analysis to order a formal “breach of union law” investigation, requiring BaFin to provide information to ESMA.

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  • Former Wirecard COO Marsalek left Philippines this week, bound for China: minister

If a breach is found, BaFin could be ordered by Brussels to make changes to its practices, an embarrassing situation for a national regulator.

Separately, Britain’s Financial Conduct Authority on Friday said it has imposed a number of requirements on Wirecard, including that it must not dispose of any assets or funds, and not carry out any regulated activities.

Wirecard, which is authorised by the FCA to issue e-money and provide payment services, must also say on its website that it is no longer permitted to conduct any regulated activity.

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UPDATE 1-German oversight of Wirecard to be examined by EU watchdog

(Adds EU securities regulator comment)

BRUSSELS, June 26 (Reuters) – The European Commission will ask its markets watchdog to investigate whether German financial regulator BaFin failed in its supervision of payments company Wirecard.

Germany’s Wirecard collapsed on Thursday owing creditors almost $4 billion.

Depending on that preliminary probe’s results, the Commission could launch an investigation into whether BaFin broke EU law on financial reporting, Valdis Dombrovskis, the Commission’s executive vice president, told the Financial Times newspaper in an interview.

“We will be asking ESMA (the European Securities and Markets Authority) to investigate whether there have been supervisory failures, and if so, to set out a possible course of action,” Dombrovskis told the newspaper.

“We need to clarify what went wrong,” he said, adding he would set a mid-July deadline for ESMA to reply.

ESMA confirmed that it had been asked to look at how BaFin enforced the EU’s transparency directive which covers financial reporting requirements for listed companies.

“We have received a request from the European Commission for a fact-finding analysis of events leading up to the collapse of Wirecard and supervisory responses to the events,” an ESMA spokesman said.

Dombrovskis could use the findings from ESMA’s analysis to order a formal “breach of union law” investigation, requiring BaFin to provide information to ESMA.

If a breach is found, BaFin could be ordered by Brussels to make changes to its practices, an embarrassing situation for a national regulator.

The EU’s transparency rules aim to ensure that investors are given the proper flow of information about a company. (Reporting by Jan Strupczewski and Huw Jones, editing by Jason Neely)

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Wirecard files for insolvency a week after €1.9bn went missing

Payments firm Wirecard has filed for insolvency proceedings – a week after disclosing that €1.9bn (£1.7bn) had gone missing.

The implosion comes less than two years after it was admitted to Germany’s prestigious DAX index of leading companies.

Once valued at as much as $28bn (£22bn), it is the first member of the DAX to go bust.

Wirecard’s collapse leaves creditors owed €3.5bn (£3.1bn), a source told the Reuters news agency.

Shares lost 80% on the announcement and have now fallen by 98% since auditor EY refused to sign off on Wirecard’s accounts last week.

That resulted in the resignation of long-time chief executive Markus Braun on Friday.

On Monday, the company said it had concluded that the missing €1.9bn probably did not exist.

Mr Braun was later arrested before being released on €5m (£4.4m) bail. He faces allegations of misrepresenting Wirecard’s accounts and market manipulation.

The ascent of the company, founded in 1999 and based in a Munich suburb, has been dogged by allegations that its revenues and profits were pumped up by fake transactions.

Wirecard said in a brief statement on Thursday that its new management had applied to begin proceedings for insolvency – a form of bankruptcy protection – at a Munich court, citing “over-indebtedness”.

It also said it was evaluating whether insolvency proceedings have to be filed for its subsidiaries.

In a later statement, it said that its continuation as a “going concern” was not assured.

Wirecard added that its banking unit Wirecard Bank was not part of the insolvency proceedings.

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