The meltdown at Wirecard AG is raising questions about the company’s complicated relationship with the troubled SoftBank Group Corp.

The Japanese conglomerate signed a strategic cooperation agreement with the payments firm last year and agreed to buy US$1 billion of Wirecard convertible bonds, although that exposure was later cut through a complex transaction. This month, a partner at SoftBank’s investment arm was on track to become a supervisory board member at Wirecard.

Then on Thursday, Wirecard revealed that auditors had been unable to find about 1.9 billion euros (US$2.1 billion) in cash that was supposed to be held in Asian banks. The company suffered one of the worst stock slumps in the history of Germany’s benchmark index, then fell again sharply on Friday.

The damage for SoftBank may be more to its reputation than its finances. The Japanese company last April unveiled a complicated transaction for about US$1 billion in convertible bonds for Wirecard. That ostensible support sent Wirecard’s stock surging, damaging short sellers.

In the end though, SoftBank never put in money itself. Instead, SoftBank employees and the sovereign wealth fund Mubadala financed the deal, and then sold their interests through structured notes. Those notes plunged 73 per cent on Thursday to about 19.9 euro cents and have dropped a further 11.7 euro cents on Friday.

“Everything about that deal is not what you would call textbook corporate governance,” said Justin Tang, head of Asian research at United First Partners in Singapore. “This is the last thing Son needs now as he deals with the fallout from Vision Fund losses.”

Kenichi Yuasa, a spokesman at SoftBank, declined to comment.

SoftBank, led by Masayoshi Son, reported a record operating loss in May, triggered by the writedown of portfolio companies at its Vision Fund investment arm. The company does not have direct financial exposure to Wirecard, according to a person familiar with the matter who asked not to be identified discussing confidential agreements.

It’s not clear yet what Wirecard’s meltdown means for its alliance with SoftBank. While auditors are working to verify the company’s finances, Chief Executive Officer Markus Braun, the company’s biggest shareholder, portrayed the company as a potential victim.

Samuel Merksamer, a partner at SoftBank’s Vision Fund, was supposed to join Wirecard’s board, with an announcement coming as soon as this month, Bloomberg News has reported.

The alliance between the two companies was aimed at facilitating partnerships between Wirecard and SoftBank’s portfolio companies, including Auto1 Group, Brightstar and Oyo Hotels & Homes. SoftBank will hold its annual shareholders meeting next Thursday.

“The president will need to explain this series of failures to shareholders at the AGM next week,” said Koji Hirai, head of M&A advisory firm Kachitas Corp. in Tokyo.