German fintech start-up Wirecard has filed for insolvency, becoming the first DAX member to fail after a financing scandal
Munich fintech start-up Wirecard has collapsed after it filed for insolvency on Thursday following a financing scandal.
It is the first time a sitting member of Germany’s blue-chip share index (DAX) has gone out of business, Reuters reported.
It comes after former CEO Markus Braun was released from custody on Wednesday after he had turned himself in on Monday evening. He walked free after he posted bail set by a Munich court at 5 million euros ($5.65 million).
German financial regulators had earlier this week called the situation at Wirecard a “scandal” and a “disaster”.
It is understood that the company had been in emergency talks with its lenders, whom it owes about 1.75bn euros, over its immediate options.
Wirecard had been until recently one of Europe’s highest-profile fintech start-ups, but last Friday CEO Markus Braun resigned after a massive discrepancy was discovered in its accounts.
Last week Wirecard said it was unable to release its annual results for 2019 because 1.9bn euros ($2.1bn) was missing from its accounts, following which Braun resigned and agency Moody’s withdrew the company’s credit rating.
On Monday Wirecard said the funds it had declared on trustee accounts at two banks in the Philippines, had probably never existed.
That declaration came after it attempted to trace the funds and reached a dead-end in the Philippines.
According to Reuters, just before the firm filed for insolvency on Thursday, its shares were suspended by the Frankfurt Stock Exchange.
Wirecard reportedly said in a two-paragraph statement that its new management had decided to apply for insolvency at a Munich court “due to impending insolvency and over-indebtedness”.
It also said it was evaluating whether to file for insolvency proceedings for its subsidiaries.
The Munich prosecutor’s office, which is already investigating Braun on suspicion of misrepresenting Wirecard’s accounts and of market manipulation, said: “We will now look at all possible criminal offences.”
Hours before he resigned, Braun had posted a video message last week, in which he said Wirecard had been the victim of fraud.
Sources have previously told Reuters that German prosecutors were also considering whether to issue an international warrant for former chief operating officer Jan Marsalek, who was fired on Monday and, according to the Sueddeutsche newspaper, is currently the Philippines.
Marsalek, who is also an Austrian citizen, was responsible for Wirecard’s business in Asia that is at the centre of suspicions the group inflated its assets and revenue.
The Philippines do not have an extradition treaty with Germany, Reuters reported.