Wirecard AG
The €1.9 Billion That Didn't Exist
Filed: June 25, 2020
German fintech darling Wirecard rose to DAX 30 status before collapsing when auditors discovered €1.9 billion in 'cash balances' that simply didn't exist. CEO Markus Braun was arrested. COO Jan Marsalek fled to Russia. It was the biggest accounting scandal in post-war German history.
The Numbers
Timeline of Collapse
-
Wirecard founded, initially processing payments for adult websites and gambling.
-
Wirecard replaces Commerzbank in the DAX 30 index — Germany's blue-chip stock index. Market cap €24 billion.
-
Financial Times publishes whistleblower report alleging accounting fraud at Wirecard's Singapore operations.
-
KPMG special audit finds it cannot verify the existence of €1 billion in revenue from third-party acquiring business.
-
EY, Wirecard's auditor for 10+ years, refuses to sign off on 2019 accounts. €1.9 billion in cash 'missing.'
-
CEO Markus Braun resigns, then arrested the next day. CFO and CPO also arrested. COO Jan Marsalek goes on the run.
-
Wirecard files for insolvency. Stock had dropped 99% in 7 days. Marsalek believed to have fled to Belarus/Russia.
-
Filipino banks confirm the €1.9 billion in escrow accounts never existed. Documents were forged.
Root Cause Analysis
What actually killed Wirecard AG.
- ▸ Entire third-party acquiring business in Asia was fabricated — fake contracts, forged bank confirmations
- ▸ Auditor EY failed to verify cash balances for 3+ years — didn't request direct bank confirmations
- ▸ German regulator BaFin banned short-selling on Wirecard stock — actively protected the fraud
- ▸ Aggressive expansion into opaque jurisdictions with minimal oversight
- ▸ Complex web of subsidiaries across Singapore, Philippines, Dubai made verification nearly impossible
Lessons Learned
What investors, executives, and regulators should take away.
- ! If a company's profits come entirely from opaque jurisdictions, assume fraud until proven otherwise
- ! When the regulator bans short-selling to 'protect' a company, they're protecting the fraudsters
- ! Auditors must verify cash balances DIRECTLY with banks — EY didn't for 3 years
- ! Whistleblowers (FT journalists Dan McCrum and Paul Murphy) spotted this years before regulators did
Sources
All data sourced from public records. Verified against SEC filings and court documents.