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Wirecard Share Collapses – Another Raid on 5 Wirecard Offices

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The DAX group Wirecard, which is involved in a billion-dollar balance sheet scandal, is expected to be broken down into individual parts and sold

The provisional insolvency administrator Michael Jaffé announced on Wednesday night that “numerous interested parties worldwide had already registered interest for the acquisition of business areas”.

Yesterday, dozens of prosecutors, police officers and computer specialists searched five buildings in Germany and Austria in search of evidence for allegedly fictitious bogus revenues booked in the Middle East and Southeast Asia, including the Wirecard headquarters in the Munich suburb of Aschheim for the second time within a month.

In the Federal Parliament, attempts by the President of the Federal Financial Supervisory Authority (Bafin) Felix Hufeld to explain the role of his authority left many questions unanswered and several opposition groups criticize him after he filed a report to the finance committee which is not accessible to the German public.

A weak consolation for the 5,800 Wirecard employees worldwide: Operation should not be interrupted or stopped if possible. The provisional insolvency administrator obviously wants to prevent the spin-off all Wirecard subsidiaries without his approval.

The US subsidiary Wirecard North America had put itself up for sale on Tuesday and emphasized its autonomy.

According to the public prosecutor, the raids were primarily about the allegations made against ex-CEO Markus Braun, among other things – incorrect information in the Wirecard books and stock market manipulation. Two objects were searched in Austria. Former CEO Markus Braun an Austrian, as is Jan Marsalek, who was formerly responsible for day-to-day business on the Wirecard board but Marsalek’s trail was lost in the Philippines.

Beyond the criminal investigation, there are increasing indications that the Wirecard Supervisory Board gave Braun and Marsalek at least joint responsibility for the affair of alleged manipulating the balance sheets in the amount of 1.9 billion euros.

The Supervisory Board subsequently released Braun without notice and the employment contract of the long-standing CEO had been terminated “with immediate effect”. Marsalek had also been fired without notice.

However, both the Supervisory Board and the auditing company EY, which audited Wirecard’s annual balance sheets, are themselves faced with lawsuits and threats from angry investors.

Financial supervision Bafin and its president Hufeld are also under pressure. After Hufeld’s appearance on the finance committee, several MPs criticized that it is still unclear why the financial supervision did not intervene earlier. “A lot has remained unanswered,” said committee chair Katja Hessel (FDP). “The financial center of Germany was damaged by the Wirecard case and there must be consequences in the end,” said the Nuremberg FDP politician.

“One thing is clear: after a comprehensive analysis, BaFin needs to be rebooted,” said green finance expert Lisa Paus. It was still open “whether Mr. Hufeld at the head of the Bafin could succeed” or would be removed.

As things stand, Wirecard managers have forged a significant portion of the company’s sales and profits in Southeast Asia and the Middle East. At the beginning of last week, Wirecard had admitted that a total of 1.9 billion euros in Southeast Asian trust accounts did not exist with “predominant probability”.

The company from the Munich suburb of Aschheim processes cashless payments as a service provider for banks, credit card companies and retailers. The subsidiary Wirecard Bank has a full banking license. One of the unanswered questions: Why was Wirecard not classified as a financial service provider and thus placed entirely under the supervision of Bafin?

According to informed circles, the European Central Bank spoke an important word. Accordingly, in 2018, at the request of Wirecard, Bafin checked whether the company was a financial service provider

– which would have meant that the Bafin was fully responsible for supervision

would have been. In the end, however, at the beginning of 2019, with the participation of the Bundesbank and the ECB, it was decided not to classify Wirecard as a financial service provider but as a technology company.

Hufeld then emphasized that all previous decisions in this regard had been made in full consensus. According to the assessment of all institutions involved, Wirecard AG has not yet been classified as a financial holding company, as a Bafin spokeswoman explained.

Wirecard not only loses money, but also customers. The Allianz Germany is because of the scandal one their pay app “Pay & Protect” , which runs via the Wirecard Bank, as the company announced on Wednesday on request. The alliance is the first heavyweight in the German financial industry to make the termination of a cooperation with Wirecard public.

Prosecutor’s office extends Wirecard investigation to fraud

In the Wirecard accounting scandal, the Munich public prosecutor’s office is now investigating suspected fraud against the former executive board of the insolvent payment service provider.

In addition to market manipulation, fraud is also an option, a spokeswoman for the authority said in Munich on Wednesday. Investigations will be carried out against the resigning Wirecard boss Markus Braun, Jan Marsalek, who was responsible for the operational business (COO), and now against the current board members Alexander von Knoop (CFO) and Susanne Steidl (CPO). Further investigations will be coordinated on a global level including Wirecard Card Solutions Limited as Mr. Alexander von Knoop was a Director at the UK subsidaery.

Authorities in Mauritius investigate Wirecard

Wirecard is now also being targeted by regulatory authorities in Mauritius.

The country’s central bank and financial regulators are investigating whether there has been round-tripping, the two offices said in a joint statement on Wednesday and we want to bring every possible violation of regulatory requirements to light.

With “Round Tripping”, sales are inflated by transferring money back and forth between individual group companies without real business. An investigation by a law firm at the Wirecard branch in Singapore in 2019 showed that this practice was used there and Wirecard denied misconduct at the time.

DSW recommends a lawsuit by Wirecard investors

The German Association for the Protection of Securities (DSW) recommends legal action to those affected by the Wirecard balance sheet scandal. “A lawsuit is the means of choice for investors,” said DSW CEO Marc Tüngler. “Incidentally, it is not only shareholders who are affected, but also owners of Wirecard bonds or derivatives based on Wirecard shares.”

The examination of claims for damages by the DSW is not affected by the initiation of insolvency proceedings. “Even if the company fails to act as a potential defendant as a result of the bankruptcy, the people involved in the Executive Board and the Supervisory Board, and in particular the long-term auditor EY, will again become the focus of attention,” said Tüngler. At the present time, none of the parties involved was excluded as a defendant.

According to their own statements, the shareholder protectors have for some time warned of the lack of transparency and the organizational deficiencies at Wirecard. “However, the ad hoc announcement of June 18, 2020 that there was no evidence for EUR 1.9 billion supposedly held in trust accounts exceeded even our worst fears,” said Tüngler.

For DSW, it is now particularly important to use litigation funding to enable Wirecard investors to file a lawsuit without any further financial risk. Affected investors can register at the email address wirecard@dsw-info.de for a specially created information service, with which the DSW provides information about the next steps.

Tüngler sees the critical attitude of the DSW towards the liability privilege of the financial supervision Bafin confirmed by the Wirecard case. “The question is, what is supervision worth to investors if they don’t have to face any consequences if they fail?”

Wirecard shares, which had almost degenerated into gambler paper, ultimately slumped in XETRA trading on Wednesday by 16.23 percent to EUR 4.80.

On Tuesday, the Wirecard shares had skyrocketed to over € 9 at times and had closed € 5.73 at the close of trading, which corresponds to an increase of around 76 percent. On Monday, they had more than tripled at times but previously, however, they had lost almost 99 percent within a few trading days.

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