TL;DR: Aschheim, Germany-based payment processor and financial services provider Wirecard AG, which underwrites the likes of services such as the exchange Crypto.com’s debit card, revealed a gap of €1.9 billion in cash missing during a routine accounting audit.
Wirecard AG Missing €1.9 Billion in Cash, Loans in Peril
Famed accounting firm Ernst & Young (EY) is apparently not ready to sign-off on a critical audit of Wirecard. The payment processor and financial services provider listed on the German stock exchange (DAX) could not provide evidence a quarter of its balance sheet, €1.9 billion in cash, exist. The implications are immediate and potentially profound, sending Wirecard stock tumbling by double digits as of publication.
Nearly a year and a half ago, the Financial Times detailed what it characterized as accounts falsification and even money laundering by a Wirecard executive, leading to an epic battle between the company and the news outlet. Wirecard sued the Financial Times and journalist Dan McCrum, alleging violations of German financial laws. The company soon became the focus of the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), the German Federal Financial Supervisory Authority, which banned the short-selling of Wirecard shares for a time. That same year, accounting heavy KPMG seemingly confirmed the latest EY revelations, citing similar reporting irregularities. Earlier this month, Wirecard offices were searched by police in connection to a criminal investigation regarding the KPMG findings.
“There are indications that spurious balance confirmations had been provided from the side of the trustee respectively of the trustee’s account holding banks to the auditor in order to deceive the auditor and create a wrong perception of the existence of such cash balances or the holding of the accounts for to the benefit of Wirecard group companies,” the company explained of the EY revelation. “The Wirecard management board is working intensively together with the auditor towards a clarification of the situation,” warning that if “certified annual and consolidated financial statements cannot be made available until June 19, 2020, loans made to Wirecard AG amounting to approximately EUR 2 billion can be terminated.”
Such a disruption might impact associated players down the financial food chain, such as cryptocurrency exchange Crypto.com and its debit card product, along with others like TenX, CryptoPay, and Wirex. None of the potentially impacted companies have released statements on the matter at the time of publication. By far, Crypto.com’s card is the most popular of the four, and notably scored its own Twitter emoji recently … second only to Bitcoin itself.
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