Troubled Debit Card Issuer Wirecard Files for Insolvency

Published at: June 25, 2020

Troubled fintech company Wirecard, which powers many of the crypto debit cards on the market, has reportedly filed to open insolvency proceedings.

As reported by Wall Street Journal and others, Wirecard filed an application with the Munich district court to begin preparing for insolvency resolution procedures. 

The company cited its “impending insolvency and over-indebtedness” as motivation for the filing, alluding to the $2.1 billion of its balance sheet that went missing.

Events unfolded quickly for Wirecard since discovering that 32% of its balance sheet never existed. The company quickly became leaderless as the founding CEO and other top executives resigned, with the former subsequently being arrested on Tuesday.

Insolvency, but not yet bankruptcy

Calling for insolvency implies that the company is unable to meet its debt obligations in the short term, either due to negative cash flow or a negative net asset balance. Given the scope of the incident, this appears to be a case of the latter.

According to its latest financial filing in 2018, the company has a net income of about $350 million, though given recent history, investors may want to take a closer look at the numbers.

During insolvency procedures, companies will generally enact drastic measures to stay afloat, such as cutting staff and expenses, restructuring debt, selling a portion of its assets and others.

Bankruptcy occurs when the company is completely unable to pay its debt obligations. While insolvency is a prerequisite of that, it does not indicate complete failure of the company.

As Cointelegraph previously mentioned, Wirecard is the issuer of many crypto debit cards including those of Crypto.com, Cryptopay, some Wirex cards and TenX.

Tags
Business
Fintech
Fraud
Debit Cards
Wirecard
Related Posts
Leaked Documents Suggest Former Wirecard Exec Was Linked to Secret Russian Gov Operations
Wirecard’s recently-prosecuted former Chief Operations Officer, Jan Marsalek, may have had ties to Russian intelligence services. He also allegedly held secret documents about the use of a Russian chemical weapon in the U.K. According to the Financial Times, the former Wirecard executive bragged of his intelligence services’ ties in an effort to further integrate with London traders. Recovered documents contain specific data on the formula for the world’s deadliest nerve agent, known as Novichok. The chemical weapon was used in the poisoning of a former Russian spy, Sergei Skripal, and his daughter Julia on March 4, 2018. Germany on the …
Business / July 10, 2020
Wirecard Folds: A Blow to Crypto Cards, but a Chance for Blockchain
Some of the most impactful frauds in modern history, from the Enron scandal to the Bernie Madoff investment scheme, were carried out by malignant actors inside or at the helm of corporate entities who manipulated the tangled, esoteric financial records. This is precisely the kind of behavior blockchain technology is designed to obliterate. The rapid demise of the German financial technology company Wirecard, which established itself in the blockchain community as a major crypto debit card issuer, seemingly belongs to the same category of events. In the long term, it might contribute to the growing public demand for increased transparency …
Regulation / July 3, 2020
Shareholders File Criminal Complaint Against EY for Alleged Role in Wirecard Scandal
Shareholders in German fintech Wirecard are taking legal action against Big Four auditor EY in the fallout from the scandal now engulfing the company. Earlier this month, the auditor had refused to sign off the fintech’s 2019 financial report after discovering a shortfall of €1.9 billion (roughly $2.1 billion) on its books. Following EY’s discovery, German authorities arrested Wirecard’s (now-former) CEO, Markus Braun, who had been at the helm of the fintech for almost two decades. Braun has been accused of conspiring to inflate the company’s assets and misrepresent what amounted to over 32% of Wirecard’s assets — $2.1 billion …
Business / June 29, 2020
Resigned Wirecard CEO Detained by Police as $2.1B Fraud Threatens Company
The former chief executive officer of Wirecard, a German fintech company, has been detained by Munich police after being charged with misrepresenting the company’s balances. As reported by Reuters and many others, Markus Braun, who led the company for the better part of two decades, has been arrested by police in Munich, Germany. According to a statement issued by the prosecutor’s office, he is accused of having conspired to inflate assets and total revenue through false transactions with “third-party acquirers.” This was done to make the company appear more attractive to investors, the prosecutors say. The misrepresented funds in question, …
Business / June 23, 2020
‘The Enron of Europe’ — What We Know So Far About the Wirecard Scandal
A new video takes viewers through German financial technology company Wirecard’s journey from being one of the top businesses in the world to one who’s shares plummeted by more than 98% before filing for insolvency. In an Aug. 6 video posted to YouTube by ColdFusion, Australian host Dagogo Altraide retells the story of how the Wirecard scandal began when auditors were unable to locate more than $2 billion that was supposed to be sitting in the FinTech firm’s Philippines-based accounts. The Wirecard board later admitted that the funds likely did not exist. “This was a tale of liars, accounting manipulation, …
Business / Aug. 7, 2020