It looks like Kylie Jenner isn’t the only entrepreneur faking her company’s bottom line (allegedly, of course). Former Wirecard CEO Markus Braun has been arrested. It appears that $ 3.7 billion has disappeared from the company’s accounts and he is accused of inflating the company’s value, sales and creating bogus transactions to make Wirecard more attractive to investors. That $ 3.7 billion represents about a quarter of Wirecard’s assets – or it would be if that money was, you know, real and not total fraud (again, allegedly). Braun was released on $ 5.7 million bail. As a result of this scandal, the company is now gone and it has also had to withdraw its corporate results for all of 2019, the first quarter of 2020, and its profit forecast for all of 2020.
The missing funds (you know, the shadow funds), were spotted by an auditor a few weeks ago. As a result, the auditor refused to approve Wirecard’s financial results. How could corporate regulators and previous auditors run out of money? That’s what the authorities want to know. Braun has stepped down as CEO. Jan Marsalek, the COO and a member of the board was fired. It appears that two other executives are being interviewed.
Wirecard was founded 21 years ago, in 1999. It has long been regarded as one of the best growing technology companies in Europe. Wirecard employs around 6,000 people in 26 countries around the world. Wirecard processes payments for businesses and consumers. It also sells data. In 2002, Markus Braun left his consultant position at KPMG to join Wirecard as CEO and CTO. He is the main shareholder of the company, with just over 7% of the shares.
Braun was born in Vienna, Austria in 1969. He graduated from the Technical University of Vienna with a degree in computer science. In 2000, he obtained his doctorate. in social and economic sciences. He worked as a consultant at Contrast Management Consulting GmbH until November 1998. From 1998 to 2001 he was a consultant in the Munich, Germany office of KPMG Consulting AG. In 2002, Braun joined Wirecard as CEO and CTO. The company was one of the most valuable companies in the German stock market. After Braun joined Wirecard, the company focused on online payment services, registering pornography and gambling websites as customers. A 2007 audit of the company was clean and did not give rise to any concerns. That same year, the company went into banking, issuing credit and debit cards through a licensing agreement with Visa and MasterCard. Wirecard has grown rapidly due to its rapid expansion into international markets by acquiring local businesses.
In 2017, Braun told investors at Wirecard that the company is using the latest artificial intelligence to analyze data. This turned out to be wrong. In fact, his staff were preparing old, normal spreadsheets to analyze the data. In early 2017, Wirecard acquired City Prepaid Card Services and relaunched it under the name Wirecard North America.
In 2018, Wirecard reported revenues of over $ 2.2 billion, four times the company’s 2013 profits. In September 2018, Wirecard’s stock hit an all-time high of $ 218. The same month, Wirecard eliminated Commerzbank from the list of the top 30 companies in Germany. At this point, the company’s market capitalization was around $ 27 billion.
The company entered the Chinese market at the end of 2019 with the acquisition of AllScore Payment Service in Beijing.
In June 2020, the audit revealed more than $ 3.7 billion in funds missing from Wirecard’s accounts. There was a frenetic race to try and find the money, but it died down last weekend in the Philippines when that country’s central bank confirmed that these funds never entered the financial system. from the country. Shares of the company fell more than 85% and Wirecard’s market capitalization fell to $ 1.9 billion. Wirecard has tried to keep its creditors at bay, to no avail.
Prosecutors now believe that Wirecard knew it had been losing money since at least 2015 and that its executives executed an organized and thoughtful fraud to hide this fact.
It all started to unfold in January 2019 when it was revealed that Wirecard had forged and backdated contracts in Singapore. The company denied this, but the whistleblower was adamant that the suspicious transactions were real. Then, at the end of 2019, it was revealed that the profits and sales had been exaggerated. The company is currently under investigation for market manipulation. The regulator who heads the supervisory board of the European Central Bank called the scandal a “total catastrophe”.
A few days after Markus Braun’s resignation, Wirecard filed for bankruptcy. It is the first company in the leading German DAX stock index to go out of business.