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Chronology: The Rise and Fall of Wirecard

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The Bundestag committee of inquiry into Wirecard should examine why the payment service provider from Aschheim near Munich had to file for bankruptcy. Why didn’t anyone suspect anything about it? Where were the regulators? A chronology of the crash.

Fin-Tech from Germany

2005: A touch of Silicon Valley wafts over the east of Munich, over the Wirecard company headquarters, a simple functional building in the suburb of Aschheim for a German fin-tech that processes digital payments for a large number of illegal online casinos and porn websites.

In 2005 the payment processor went public and the company only seems to know one direction: up. The supposed growth is breathtaking. Even the IPO is unusual: Wirecard is teaming up with another company that was already listed on the Neuer Markt; this may not only save a lot of money, but also improve the view of the balance sheets.

Wirecard ousts Commerzbank from the DAX

September 2018: The operator of Deutsche Börse includes Wirecard in the DAX-30. Commerzbank, a veteran in the stock market index, flies out. It seems to be the fin-tech victory over the old banking houses. However, there had already been critical press reports , especially from the Financial Times and these will accumulate from the beginning of 2019. The target is Wirecard’s business in Singapore as contracts were forged there. There was also money laundering and also documents circulated that managers in Germany were aware of the scams.

Special audit by the financial regulator and KPMG

In February 2019, the financial supervisory authority BaFin commissioned a special audit. There is only one man responsible for this, who is hopelessly overwhelmed by it. And later in the year, KPMG’s auditors review the payment service provider. These proceed with forensic, i.e. criminalistics, methods and constantly encounter new inconsistencies. The competing company EY had previously examined and audited the balance sheets for many years which makes it part of the scam.

No Balance Sheet  for 2019

Early 2020: The stories about dubious bogus companies, trustees and dodgy middlemen are getting more known from week to week and Wirecard had to postpone the publication of the annual balance sheet several times. The auditors refuse to attest the documents, as it is called in technical jargon, i.e. to sign that the figures given are actually correct. You can’t find any plausible evidence that there are accounts in Asia that should be close to two billion euros. At the beginning of June, the company headquarters in Aschheim was searched by the Munich public prosecutor.

Wirecard files for bankruptcy

Wirecard files for bankruptcy on June 25, 2020 due to a 1.9 billion euro hole in the balance sheet, “the Management Board of Wirecard AG has decided to file an application for Wirecard AG at the competent Munich District Court to open insolvency proceedings due to impending insolvency and over-indebtedness,” the company announced. Michael Jaffé from Munich is employed as the insolvency administrator.

Arrests and escape

On July 22, the Munich public prosecutor reported several arrests , including that of a key witness from Dubai. Since then, the former CEO Markus Braun has been in custody. Initially, it is only about the allegation of market manipulation. Now senior public prosecutor Anne Leiding is also talking about possible falsification of accounts, breach of trust and fraud. Important business figures have been embellished for years, sales and profits inflated in order to get new credits. The nested group consisted of more than 50 subsidiaries. The former Chief Operating Officer (COO), Jan Marsalek, is now in hiding. As early as June 22nd, the Munich I public prosecutor issued an arrest warrant against Marsalek, which, however, could not be executed.

Initially it is believed that he fled to Russia. It is later said that his trail was lost in Belarus.

Opposition calls for a committee of inquiry

On July 29, the Wirecard bankruptcy reached the German Bundestag and all members of the finance committee have been recalled from their summer vacation. They interview Finance Minister Olaf Scholz , Economics Minister Peter Altmaier and the President of the German Audit Office (DPR) for a total of seven and a half hours.

It becomes clear that Wirecard is one of the biggest economic scandals in German history which could have been stopped since 2018.

The financial service provider was a pseudo giant that should never have been included in the DAX, says CSU politician Hans Michelbach after another two-day meeting of the committee on September 4th. The opposition pushes through a committee of inquiry.

Wirecard is thrown out of the DAX

August 21: Wirecard leaves the German DAX index. In view of the bankruptcy, Deutsche Börse has to hectically change its rules. Nobody expected a DAX company to go bankrupt. Insolvent companies are now supposed to disappear from the indices with a period of two trading days. Meanwhile, insolvency administrator Michael Jaffé leaves no doubt: Wirecard is over-indebted with billions, the insolvent holding company is not viable. There are only interested parties for individual business units in different countries. There is hardly anything to recycle. Pretty much everything was leased from Wirecard, from office equipment to IT service and the banks have to write off their loans.

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Holvi Mastercard temporarily suspended due to Wirecard insolvency

Wolfgang Holzem

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Holvi Mastercard has been temporarily suspended due to recent events in connection with the insolvency of Wirecard AG

How did this happen?

The UK Financial Conduct Authority (FCA) has suspended service for Wirecard Card Solutions Ltd (WDCS) earlier today. WDCS is a subsidiary of Wirecard AG and issues the Holvi Business Mastercard. This decision was taken by the FCA without any prior notice.

What does this mean for you?

All other functions of your Holvi account are still fully available. You can still invoice, receive and transfer funds. Please be assured that all Holvi customer accounts and funds remain safe, secure and accessible at all times – no Holvi accounts have been impacted by this event. This is because all Holvi customer funds are segregated and held in separate accounts in European banks in Finland, Sweden, Denmark, the UK and France.

No customer funds are held by Wirecard AG. Your money and Holvi account are safe.

Your trust is our top priority. We’re actively working on a solution and will continue to update as soon as possible.

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Wirecard Board wants to continue Business in the UK and discussion are ongoing with the FCA

Wolfgang Holzem

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The payment processor struggling to survive a balance sheet scandal Wirecard, continues to do business despite the application for bankruptcy. “The board is of the opinion that a continuation is in the best interest of the creditors,” said the Dax group on Saturday in Aschheim near Munich.

The management board made an application for the opening of insolvency proceedings for Wirecard AG last Thursday.

According to the company, the examination of whether insolvency proceedings will be opened continues.

The business operations of the group companies including the licensed units are currently being continued, it said. It is constantly checked whether bankruptcy applications for subsidiaries of the Wirecard Group must also be made. Group companies, with the exception of a small development branch, have currently not filed for bankruptcy.

The Wirecard Bank is currently not part of the bankruptcy proceedings, the payment transactions of the Wirecard Bank are not affected, the company emphasized. Payments to Wirecard Bank merchants would continue to be carried out without restrictions. They are also “in constant communication with the credit card organizations”.

Wirecard Card Solutions has interrupted business

Wirecard Card Solutions Limited, based in Newcastle, “has interrupted its business due to an order from the responsible Financial Conduct Authority,” it said. However, Wirecard hopes to be able to continue operations in the UK with its current global B2B clients.

Current B2B clients include Payoneer, Hovi, Curve.

Measures for this are discussed currently with both the UK and German authorities.

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Thousand’s of Payoneer Mastercard Holders still Affected by Wirecard UK and can’t Access their Funds in Pakistan Bangladesh & Balkan countries

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Many of Payoneer’s millions of Freelancers have their freelance work paid into the card account, which is easier to open than a bank account in countries such as Pakistan, Bangladesh, Venezulea, Argentina and Balkan countries.

According to reports on Facebook, it is assumed that thousands’ of Payoneer Card holders are still unable to access their funds in Pakistan, Bangladesh and in Eastern European countries. Payoneer card holders within the European Union and certain countries outside the European Union face no restriction and AirBNB Host users are also able to withdraw funds, available on their cards.

Ring-fenced cash

Funds held by e-money firms like Wirecard are not guaranteed up to £85,000 as bank deposits are, although they are held in banks such as Barclays and will be safeguarded.

Payoneer has told customers: “Your funds are being held by Wirecard in a ring-fenced designated account with Barclays. This means in the event of Wirecard going bust you are protected.”

Even so, the FCA is anxious to make sure no money is siphoned off because of Wirecard’s collapse in Germany.

Christopher Woolard, the FCA’s interim chief executive, told the BBC’s Today programme the FCA had “imposed very strict conditions” on Wirecard’s UK subsidiary based in Newcastle, which had knock-on effects for about 70 payments firms, including some firms that operate out of the United Kingdom and the European Union.

Mr Woolard said the FCA had spent the last few days making sure money belonging to people in the UK and the European Union was now safeguarded in UK bank accounts with strict conditions.

The auditor of EB (Ernst & Young) signed of the full accounts made up to 31 December 2018 and according to the official Financial Statement, Wirecard Card Solutions Ltd held 465 million GBP in Customer Deposits.

WCSL has not filed the Financial Statement for 2019, but it is assumed that customer deposits of around 600 million GBP was frozen when the FCA suspended last week’s Wirecard operating in the United Kingdom.

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