Larry Berman on Wirecard fraud and Fed stress tests
Former Wirecard AG Chief Executive Officer Markus Braun and two other former officials were arrested as prosecutors said the company knew about massive losses as early as 2015.
The three conspired to obtain about 3.2 billion euros (US$3.7 billion) in fraudulent loans, Munich prosecutors said Wednesday. Company officials allegedly decided to inflate the books with fake assets to make the company appear more attractive to investors, clients and lenders.
“In reality, the suspects knew at least at the end of 2015 that the Wirecard Group was losing money,” prosecutors said. “Deceived by faked accounts, banks in Germany and Japan as well as other investors granted funds of about 3.2 billion euros, which are now most likely lost.”
Wirecard filed for bankruptcy after acknowledging that 1.9 billion euros it had listed as assets probably didn’t exist, deepening its accounting woes. The company admited that previous descriptions of its business with third parties, which processed transactions on Wirecard’s behalf, were “not correct” after pulling its financial results for 2019 and the first quarter of 2020.
Wirecard declined to comment before the prosecutors’ announcement. Shares of the company fell as much as 5.2 per cent before recovering.
Wednesday’s arrests weren’t the first in the case and likely won’t be the last.
Braun had already been detained in June, but was released on bail a day later. Earlier this month, Munich prosecutors arrested Oliver Bellenhaus, the former managing director of a Dubai-based Wirecard unit, who is cooperating with the case.
Former Wirecard AG executive Jan Marsalek apparently fled to Belarus last month and is presumably still there or in Russia, German media has reported.