The CEO of Wirecard
According to Munich prosecutors, Markus Braun, former Wirecard CEO, was arrested on suspicion of infiltrating the company's balance sheets through falsified transactions in an effort to attract investors and customers to the digital payment company's platform. Prosecutors say it's possible that Braun may have acted with the assistance of other perpetrators.
Braun is scheduled to be released from custody on a $5.7 million bail on Tuesday. He is expected to be required to make weekly reports to the police.
Braun resigned from his position on June 19, just days after the company announced it couldn't trace €1.9 billion (roughly $2 billion) in cash. This amounts to roughly a quarter of Wirecard's total balance sheet. According to the company, this money likely never existed at all.
As a result of the financial implosion, Wirecard said it would no longer be able to produce a new set of financials as planned. It also plans to cancel roughly $2 billion in loans.
Richard Sbaschnig, head of the research team of financial forensics at the investment firm CFRA, told Business Insider that the company will likely face a liquidity crunch as it struggles to find the money to pay back these loans.
According to CNN, this scandal is already being compared to the likes of Enron due to disbelief over how the company's auditors and regulators could have possibly missed such accounting irregularities.
Given the charges against Braun, some are theorizing that Wirecard itself may have been the victim of fraud. However, the Financial Times reported in October 2019 that Wirecard's finance team had worked to inflate sales, meaning it may be unlikely that the company didn't know something was going on. In the past, the company was considered one of the most promising fintech firms in all of Europe and offers services such as payment processing for customers and businesses and data analytics. The company operates in 26 countries and employs just under 6,000 workers.
Braun has been at the head of the company since 2002. Braun is the company's largest shareholder and the company quickly grew with him in charge. During his tenure, Braun oversaw a massive international expansion and the acquisition of Citigroup's
Since the missing money was first announced, the company's share prices have plummeted by 85%. Media outlets first noted irregularities with the company's finances in January of last year. The Financial Times reported that the company had forged and backdated contracts in order to inflate its revenue figures.
