Wirecard: Around 870 million disappeared - companies "plundered" shortly before bankruptcy

The payment service provider Wirecard is now facing relegation from the Dax after the bankruptcy. But potential successors find it surprisingly difficult to take on the legacy of the Aschheimers.  

• After the bankruptcy, Wirecard is also about to be kicked out of the Dax.
• The decision on the compulsory exclusion of the Aschheimers is imminent.
• But not all candidates find the prospect of a possible promotion to the German Stock Exchange Premier League tempting.

Update from August 10, 4:15 p.m. - The insolvent payment service provider Wirecard has long been considered a model company in the Dax. But at the latest since the 1.9 billion euros equity disappeared overnight in spring, the company has only been considered an eyesore in the Dax. This week, Wirecard is likely to fly upright out of the most important German stock market barometer.

September 6, 2018 was a tough day for Commerzbank employees and their shareholders. On this late summer day, the traditional credit institution had to remove it from the German Share Index (Dax). The payment service provider Wirecard took over the place of the second largest German private bank. Many observers thought that was really cool: Finally a touch of Silicon Valley in the otherwise dusty German stock market barometer, they said.

Wirecard: an abyss of treason

Barely a year and a half, the former shooting star from the Dax is broke. And instead of high-tech Made in Germany, the high-flyer from the Munich suburb of Aschheim now turns out to be just an abyss of treason.

This week the biggest misunderstanding in the history of the German stock market barometer could finally come to an end. Deutsche Börse plans to publish the results of an opinion poll among market participants by August 13th at the latest. In essence, the survey among the professionals was about the question of whether the index rules should be adjusted so that in future an insolvent company can be thrown out of the Dax beyond the regular review dates. You don't have to be able to operate a crystal ball to predict the answer.

After all, the Wirecard case probably did more damage to Germany as a stock exchange location than the scandal surrounding the invented horizontal drilling machines at Flowtext and the billion-dollar bankruptcy of HRE put together.

Wirecard: The possible DAX successors

If investors and Deutsche Börse get their thumbs down over the course of the week, things should go very quickly for Wirecard. The former stock market high flyer is due to fly out of the Dax in August and thus much earlier than previously thought. The current regulations of Deutsche Börse would not have provided for a descent until the next regular examination date on September 21 - unless the opening of insolvency proceedings is rejected due to insufficient funds. There is little evidence of this at Wirecard at the moment. Deutsche Börse has therefore tightened its regulations and obtained feedback from investors.

I also don't know whether it's so great to be a direct successor to Wirecard's heap of rubble.

The delivery service Delivery Hero and Symrise are considered possible successors from Wirecard . But at least the boss of the flavor manufacturer from Holzminden is not that keen on the Dax. "I also don't know," said Symrise boss Heinz-Jürgen Bertram when the quarterly figures were presented on August 6, "whether it is so great to be a direct successor to the heap of rubble Wirecard."

Wirecard: Around 870 million disappeared - companies "plundered" shortly before bankruptcy

Munich - With the insolvent payment service provider Wirecard , around 870 million euros are said to have disappeared in dark channels shortly before the bankruptcy in June . The company was literally "looted", reports the Financial Times on its website. 

According to the report, the money is said to have flowed out through loans to Wirecard partner companies in Dubai , Singapore and the Philippines, writes the FT. The English business newspaper had started the investigation against Wirecard with its persistent reporting.

Wirecard: Is there a connection between the missing 1.9 billion and the loans?

The payment service provider from Aschheim near Munich had to file for bankruptcy at the end of June after 1.9 billion euros had vanished into thin air. Observers suspect that the air bookings may be related to the generous loans to the group subsidiaries.

According to initial estimates, the financial damage to the company listed in the German flagship index Dax should be around 3.5 billion euros. In addition, there are billions in losses for investors.

Meanwhile, the Munich I public prosecutor's office is investigating Wirecard and several managers on suspicion of falsification of accounts, breach of trust, price manipulation and joint gang fraud. Several former Wirecard employees are now in prison, including ex-Wirecard boss Markus Braun , the former CFO Burkhard Ley and the former chief accountant behind bars.

Wirecard: Dubious million-euro loans to subsidiaries

According to FT, the dubious payments to subsidiaries played a central role in the investigations of the prosecutors. According to this, a total of around 155 million euros were paid out in the first three months of 2020 alone. According to FT, the majority of the loans went to Ocap . The Singapore- based company alone received additional loans of more than 100 million euros. With that, Ocap was in the chalk at Wirecard with a total of 230 million euros.

Another 40 million euros went to the Singapore-based company Ruprecht Services . At the end of March, Wirecard is said to have issued loans with a total volume of around 870 million euros to subsidiaries in Asia, writes the FT.

Wirecard: Al-Alam in Dubai is again playing a questionable role

Further funds are said to have been transferred to Al-Alam in Dubai and Pay Easy in Manila, among others . According to Wirecard, Al-Alam was Aschheim's most important third-party partner for years. A good third of the business and almost half of the profit were processed through the third-party partner in Dubai , it said.

However, not least because of the reports by the FT, doubts about this representation had grown considerably. In order to dispel the reservations, Wirecard finally gave in to the growing public pressure and commissioned a special audit by the auditing company KPMG . Al-Alam suddenly stopped operating in mid-May. The reputational damage was too great, a Wirecard spokeswoman justified the surprising step.

Wirecard: millions of loans in front of the special auditors from KPMG

According to the FT, the loans are said to have been granted even when KPMG was already commissioned with a special audit and was also supposed to examine Al-Alam's business. 

Wirecard scandal: Now the sell-off begins - the most popular parts of the company

First report from 7/27/2020: Munich - In the scandal surrounding the insolvent payment service provider Wirecard , the provisional insolvency administrator Michael Jaffé is apparently making good progress. For a possible takeover of Wirecard's US business alone, there is now a "double-digit number of interested parties," according to informed sources. In addition, the first indicative offers have been made for the US subsidiary Wirecard North America . More offers are likely to arrive in the coming days, said a person familiar with the processes to the central editorial office of Ippen Digital. 

Wirecard break-up: Greatest interest in core business

However, the greatest interest continues to be seen in a possible takeover of Wirecard's core business. It is said that there is “strong interest” in this from both financial and strategic investors .

Wirecard grew up with what is known as acquiring and issuing . With acquiring, Wirecard takes on the billing of credit card transactions at the cash register terminal in the supermarket or payment in the online shop. The issuing business includes the issue of prepaid or debit cards, which are loaded with money or - depending on the agreement - debited immediately with the purchase or later.

In addition, customers can process all of their payment transactions through the issuer. In the case of the company from Aschheim near Munich, it was Wirecard Bank .

Wirecard: The sales process is in full swing

Potential buyers for parts of the insolvent DAX group can obtain information after registering in virtual data rooms and carry out the so-called due diligence . In addition to an insight into all relevant economic data, the tests also include a meticulous review of contracts with customers or employees. In addition to the respective specialists for the respective business, lawyers or tax consultants are also involved in the due diligence.

Overall, there is great interest in Wirecard . According to the Wirecard insolvency administrator Michael Jaffé, there are a total of over 100 interested parties. The talks about the sale of Wirecard's US business are the most advanced, Jaffé announced at the beginning of July. 

Wirecard North America put itself up for sale only shortly after the crashing bankruptcy of Wirecard AG at the end of June and involved the US investment bank Moelis & Company  . In a communication on this, the Americans had emphasized their economic independence from the parent company. It was said to be a “self-sustaining unit that was largely autonomous from Wirecard”.

Wirecard bankruptcy: One of the biggest fraud scandals in German post-war history

Wirecard filed for bankruptcy at the Munich District Court at the end of June, after 1.9 billion euros and thus around a quarter of the balance sheet total had disappeared without a trace. The Munich public prosecutor's office is now investigating the case. In addition to the suspicion of unfaithfulness, incorrect presentation and market manipulation, there is now also suspicion of commercial gang fraud . Former CEO Markus Braun is now back in custody after a first arrest warrant against payment of a bail of five million euros was suspended at the end of June. A former CFO and the former chief accountant have also been arrested.

Angela Merkel apparently spoke to the then #Wirecard consultant Karl-Theodor zu Guttenberg about the scandal group's expansion in China last year. The Chancellery promised its help. https://t.co/NhBvuV3Rs9

The crashing crash of the Dax group is making waves. Especially the auditor EY(formerly: Ernst & Young) and the financial services regulator BaFin have come under fire. It was only on Thursday that the capital market law firm Tilp filed a lawsuit against the financial supervisors with the Frankfurt Regional Court. So far, investors have submitted claims for damages totaling around 6.5 billion euros to the law firm for review. The federal government is now in need of an explanation. The Bundestag Finance Committee holds a special session. In view of an unprecedented slump in prices and billions in damage to banks and investors, the case is now one of the largest fraud scandals in post-war German history.