Wirecard is a huge
company established in 1999 and serving in the fintech field. The company,
which was the subject of a $ 2 billion scandal earlier this month, has
requested its own bankruptcy.
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Wirecard Crisis
First of all, I will
give some information to understand the size of the company. The company
provides services to more than 7,000 corporate customers globally in the areas
of payment transactions, card issuance and risk management. In addition, as a
result of an audit by EY Germany in 2017, it was announced that the company
pays for 250,000 people and has 5,000 employees. The company's annual turnover
had already exceeded 2 billion dollars.
So the company rarely
accomplished something that happened. A European-based fintech company was
coming to the point where it would challenge its counterparts in the silicon
valley for the first time.
Beginning of Question
Marks
The first question mark
about the company's turnover and valuation was actually beginning to appear in
2008. The head of a shareholder association in Germany shared information on
this issue. As a result, instead of a Munich-based audit company, EY Germany
was appointed for audit duty. In this process, an investigation was launched
against two managers.
Meanwhile, it is Markus
Braun, who has been the CEO of the company since 2002. He was a former KPMG
consultant. In 2010, Jan Marsalek, who allegedly became a friend of Markus
Braun, was appointed as a COO to the Wirecard company.
An article in the
Financial Times in 2015 suggested that there was a $ 250 million deficit in the
group's accounts. Even if the company denied this through their lawyers, many
accusations against Wirecard were reported to the press in this process.
Company's Stock Prices
Melted 98%
The share prices, which
saw $ 190 at the end of 2018, have decreased by 98% since the beginning of
2019. Although this big scandal caused by the company has been on the agenda in
the past 30 days, Wirecard has been going through a turbulent process since the
beginning of 2019.
The reason for the
sudden drop in early 2019 was an article published in the Financial Times. As a
result of this article, Wirecard's Singapore office was raided by the police in
February. BaFin, the public inspection agency in Germany, brought a 2-month
sales ban to the company. At the end of this process, state authorities in
Singapore and the Philippines declared some employees of Wirecard and 8
companies of the group operating in Asia as a suspect.
After these scandals,
the share value of the company made another bottom at the end of 2019 and with
the pressure of investors, it was decided to appoint KPMG within the scope of
financial audit instead of EY.
The End…
According to the KPMG
audit report published on April 28, 2020, the profits announced by Wirecard
between 2016 and 2018 were doubtful. EY Germany provided 'documents' that did
not contain precise information, rather than providing the bank's statements
for the assets and transfers that the company holds in international banks. In
other words, whether this number of money was real or not was definitely not
confirmed.
Although the CEO of the
company made a statement to investors that the audit reports of EY were not
wrong, the building of the company in Germany was searched by the police after
an investigation by BaFin on 5 June.
On June 16, BPI and
BDO, the Philippine banks, denied the balance of 1.9 billion euros. These
figures, which were not fully questioned by EY and accepted as real, did not
reflect the truth.
On June 18, 2020, the
2019 audit report was expected to be announced, with company officials
declaring that 1.9 billion euros were 'lost'.
On June 22, 2020, the
real scandal broke out. The company officially announced that $ 1.9 billion
"could not exist" and "could not trust the company's previously
announced statements". Already a few weeks ago, the company's CEO, Markus
Braun, resigned, and his COO friend was dismissed after this statement.
On June 23, 2020,
Markus Braun was arrested on charges of "improper accounting and market
manipulation." On June 25, it was announced that the company filed an
official application for bankruptcy.
A Second Enron Crisis?
It was the EY Germany
office that audited the financial statements the company considered 'suspect'.
It is argued whether the end of the company involved in this process and
accused of corruption will be like Arthur Andersen. The Enron Scandal occurred
in 2001 as a result of the audit firm's $ 600 million error.
In terms of material
damage, a bigger scandal is mentioned than Enron… I hope the EY company will
not end like Arthur Andersen of the time.
You
can read the post in which I explain 3
things you should know before you become an entrepreneur in detail in this link.
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