Munich prosecutors confirmed on Tuesday that Braun, the former CEO of Wirecard, had been arrested on suspicion of inflating the balance sheet and the sales of the digital payment company through fake transactions in order to make the company more attractive to them. investors and clients. Prosecutors said Braun may have acted in cooperation with other perpetrators.
Wirecard admitted on Monday that 1.9 billion euros (2.1 billion dollars)in cash included in the financial statements - about a quarter of its assets - probably never existed in the first place. The company has withdrawn its preliminary results for 2019, the first quarter of 2020 and its profit forecasts for 2020.
The scandal erupted last week when Wirecard said its auditor, EY, could not locate the funds in trust accounts and refused to sign the company's financial results.
Braun resigned as CEO on Friday, suggesting the company may have been the victim of massive fraud. Jan Marsalek, member of the board of directors and chief operating officer of Wirecard, was dismissed on Monday.
Founded in 1999, Wirecard was once considered one of the most promising technology companies in Europe. It processes payments for consumers and businesses and sells data analysis services. The company has nearly 6,000 employees in 26 countries around the world.
Braun, an Austrian who was also chief technology officer of Wirecard, has run the company since 2002. The former KPMG consultant is the company's largest shareholder, with a stake of just over 7%, according to data from Refinitiv.
Wirecard grew quickly with Braun at the helm. The company reported sales of more than 2 billion euros ($ 2.2 billion) in 2018, more than four times the figure in 2013. Stocks reached record high above 190 euros ($ 213) in September 2018, the same month that Wirecard replaced Commerzbank in the list of the top 30 German companies. At that time, it was worth more than 24 billion euros ($ 26.9 billion).
The company is now facing an existential crisis. A frantic search for missing money ended in a dead end this weekend in the Philippines, where the central bank denied that cash had entered the country's financial system. The company's shares fell on Monday, prolonging a crash that has wiped 85% of its stock price over three trading sessions. Wirecard ended the day with a market value of 1.7 billion euros ($ 1.9 billion).
Wirecard is working to keep creditors at bay, a task that could be complicated by the arrest of its former CEO. Friday evening, the company announced that it has hired investment bank Houlihan Lokey to develop a new financing strategy.
The implosion follows a tumultuous period of 18 months for the company punctuated by allegations of fraud, attacks by short sellers and questions about its accounting practices.
The success story started to unravel in January 2019, when the Financial Times reported that Wirecard had falsified and backdated contracts in a series of suspicious transactions in Singapore. The company denied the report, which was produced with the help of a whistleblower, but its shares fell. In February 2019, Singapore authorities announced that they would open an investigation.
Another blow struck late last year, when the FT released a report and corporate documents suggesting that profits and sales had been boosted at Wirecard outposts in Dubai and Ireland. Wirecard again denied the allegations. But a KPMG investigation released in April found that the company had not provided enough information to fully explain the issues raised by the FT.
Braun reported to prosecutors on Monday evening after the issuance of an arrest warrant against him. Prosecutors say a judge will decide Tuesday whether to stay in detention. The former CEO explained his decision to leave last week in a letter to employees and shareholders.
"The capital market's confidence in the company I have been running for 18 years has been deeply shaken ... I respect the fact that the responsibility for all business transactions rests with the CEO," said Braun.
- Mark Thompson contributed to the report.
