Wirecard: The €1.9 Billion That Was Never There

How did Wirecard, Germany's fintech champion and a DAX company once valued at about €24 billion, collapse in seven days over €1.9 billion that its auditor could not find? This is the full Wirecard scandal: the third-party acquirers, the escrow accounts in the Philippines, the Financial Times investigation, the regulator that banned short selling instead of asking questions, the €900 million SoftBank vote of confidence, and the June 2020 week when the CEO resigned, was arrested, and his deputy vanished. Founded in 1999 near Munich, Wirecard processed online payments and grew into Germany's homegrown technology champion, entering the DAX index in September 2018 and briefly becoming worth more than Deutsche Bank. In 2018 it reported revenue of €2.02 billion and net income of €347 million. But its most profitable business ran through third-party acquirers in countries where it held no licence, and by 2019 those partners' escrow accounts held, on Wirecard's own books, more than half of its reported cash and effectively almost all of its reported profit. The Financial Times questioned the accounts from 2015, reported forged and backdated contracts in Singapore in January 2019, and visited a Philippine partner address that turned out to be a private home. Germany's regulator, BaFin, responded by banning short selling of Wirecard shares for two months and filing complaints against the journalists. In April 2019 SoftBank invested €900 million, and in September 2019 Wirecard raised another €1.4 billion in bonds. In April 2020, KPMG's special investigation could not verify the 2016–2018 profits or about €1 billion in cash balances. On June 18, 2020, auditor EY refused to sign the 2019 accounts, saying it could not obtain sufficient evidence that €1.9 billion in escrow accounts existed; the Philippine banks said Wirecard was never their customer and the documents were forgeries. CEO Markus Braun resigned on June 19 and was arrested on June 22; chief operating officer Jan Marsalek was fired and disappeared. On June 25, 2020, Wirecard filed for insolvency, the first DAX company ever to go bust, owing creditors about €3.5 billion. Braun denies all charges, and his trial is where those charges must be proved, not assumed. CHAPTERS 00:00 — June 18, 2020: the money that was not there 01:27 — The German Fintech Champion 04:22 — The Machine That Printed Profits 07:10 — The Warnings Nobody Wanted 10:09 — The Last Vote of Confidence 12:59 — Seven Days to Zero 16:16 — What Actually Died in June 2020? This is a story about the past, not investment advice. Music: "Nightmare Machine", "Stay the Course", "Deep Haze", "Desert City", "The Pyre" by Kevin MacLeod (incompetech.com) — CC-BY 3.0