Germany's Wirecard Collapses, Unsure of Own Survival

Chris Gaetano
Published Date:
Jun 25, 2020
German fintech company Wirecard, the subject of a major accounting scandal involving an almost-assuredly fictitious $2 billion—resulting in the arrest of the former CEO—has declared itself insolvent and is unsure of its own survival as a going concern, according to Reuters. The company made the announcement after realizing it could not pay $1.5 billion worth of loans that were due at the end of the month, which was only the tip of a $4 billion iceberg of debt that the company had accumulated over the years.

While insolvency proceedings, which legally work pretty much like bankruptcy in the United States, will allow creditors to recover at least some of the money owed to them, Reuters quoted a banker who said that it is unlikely that they will recover anything significant. Thus marks the fall of what had once been one of the largest companies in Germany—and a darling of the tech set—into a pariah company whose stock value collapsed by 98 percent in a week.

Reuters said the incident has shaken German regulators, quoting Felix Hufeld, the head of regulator BaFin, who called the scandal a “total disaster.” Regulators are openly wondering how auditors were able to sign off on Wirecard's financial statements year after year. The audit firm, Ernst & Young, is itself now the subject of a class action lawsuit. Private investors behind the suit argue that, by failing to flag the 1 billion euros in assets that were improperly booked, the firm gave misleading market signals that burned private investors.

Click here to see more of the latest news from the NYSSCPA.