Wirecard ex-boss under arrest as firm implodes

The payment service provider Wirecard is accused of market manipulation, and its collapse has led to calls for a tightening of regulations. (AP)
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Updated 24 June 2020

Wirecard ex-boss under arrest as firm implodes

  • Creditors hunt for lost billions as company reveals $2.1bn financial hole

MUNICH: Wirecard’s former boss has been arrested on suspicion of falsifying its accounts, after the German payments firm disclosed a $2.1 billion financial hole and questioned whether trustees had actually held money on its behalf.

Markus Braun turned himself in on Monday night after Munich prosecutors issued a warrant for his arrest. A judge ruled on Tuesday that the 50-year-old Austrian could be released as soon as he posts €5 million ($5.7 million) in bail.

In his 18 years in charge, Braun transformed an offshoot of the dot.com boom, known for handling payments for online gambling and adult entertainment sites, into a $20 billion-plus “fintech” that won a place in Germany’s blue-chip DAX index.

The former consultant traded in a suit for a black roll-neck and portrayed himself as a tech visionary, telling New York investors last autumn that Wirecard would increase revenues by six times by 2025 as digital payments boom.

Wirecard’s meteoric rise was, however, accompanied by repeated allegations from whistleblowers, journalists and speculators that its revenue and profits had been pumped up through fake transactions with obscure partners.

Braun, who will have to report to police once a week, said last week in a video statement that Wirecard may have been the victim of fraud, without giving details.

He now stands accused of misrepresenting Wirecard’s accounts and of market manipulation by falsifying income from transactions with so-called third-party acquirers, the Munich prosecutor’s office said earlier.

Two people familiar with the matter said state prosecutors were also considering issuing an arrest warrant for Jan Marsalek, a board member fired on Monday. Lawyers for Braun and Marsalek were not available for comment.

Wirecard’s implosion was described on Monday as a “total disaster” by Germany’s financial regulator, who has come under fire for pursuing its critics and not the company. Finance Minister Olaf Scholz told Reuters on Tuesday that lawmakers should decide quickly how to tighten regulation following the Wirecard scandal, which had exposed lapses by both auditors and regulators.

An external audit by KPMG in April could not verify cash balances, questioned Wirecard’s acquisition accounting and was unable to trace millions in reported cash advances to merchants.

Braun, who said at the time that the allegations were not confirmed “in every point,” quit on Friday after in-house auditor EY refused to sign off on Wirecard’s 2019 accounts.

Wirecard’s shares have since shed more than 80 percent and its only listed bond is trading at 26 cents on the euro, indicating that investors expect to lose most of their money.

New CEO James Freis, a former financial investigator at the US Treasury and compliance chief at the Frankfurt Stock Exchange, has opened urgent talks with 15 banks that have lent € 1.75 billion to Wirecard.

With Wirecard having failed to file audited financials, the banking consortium led by Germany’s Commerzbank could call in the loans at any time.

Sources close to the talks said it was doubtful that Wirecard can continue as a going concern, while risks of litigation ruled out asset sales for now.

The main question is whether to allow the firm to keep operating for a couple of weeks, to allow more time to recover money, one source familiar with the talks said.

More than 5,000 staff are due to be paid at the end of June, and bankers would decide before then whether to pull the plug and trigger insolvency, the source added.

Wirecard is being advised by investment bank Houlihan Lokey and the creditors by law firm Allen & Overy. Both declined comment.


Dubai’s Jafza, Israeli business group sign strategic partnership

Updated 26 September 2020

Dubai’s Jafza, Israeli business group sign strategic partnership

DUBAI: Dubai’s Jebel Ali Free Zone has signed a strategic partnership with an Israeli business group to support businesses and encourage economic cooperation following the normalization of ties between the UAE and Israel.

Sultan Ahmed bin Sulayem, the group chairman and chief executive of DP World, and Uriel Lynn, president of the Federation of Israeli Chambers of Commerce, signed the agreement virtually.

As part of the agreement, the two parties will share crucial information on new developments regarding economic relations between the countries aside from efforts to expand ties between businesses.

“The establishment of direct ties between two dynamic and advanced economies in the Middle East will undoubtedly provide impetus to economic growth, transforming the business landscape in the UAE,” bin Sulayem said in a statement.

It will be a mutually advantageous for Dubai and the Israeli business community, as more businesses will utilize the developed facilities and services in Jafza and create a bridgehead for the Israeli business sector to enhance its foreign trade in products and services,” Lynn meanwhile commented.

“Our main goal is to create a forum to promote economic cooperation and create new opportunities for businesses in both countries. Strengthening business ties and enhancing collaboration over time is also one of the primary objectives.”