Wirecard Scandal

The New ENRON

Presenters
Umair Ijaz

Usama Aziz

Iyyaz Khalid
Daniyal Zaidi
Sehrish Khalid
Fazeelat Ashraf
 Wirecard’s Introduction
Wirecard AG is an insolvent, German payment
processor and financial services provider, who’s
former CEO, COO, two board members, and other
executives have been arrested or otherwise implicated
in criminal proceedings. The company offered
electronic payment transaction services, risk
management, and issued and processed physical and
virtual cards. As of 2017, the company was listed on
the Frankfurt Stock Exchange, and was a part of the
DAX stock index from September 2018 to August
2020..
The company was founded in 1999. In 2002,
when it was close to folding at the end of the
dot-com bubble, Markus Braun injected
capital and joined as CEO. He consolidated
the company and focused the business
model on providing internet payment
services, initially mainly to porn and
gambling websites..

The company is the center of an international financial

scandal. Allegations of accounting malpractices had
trailed the company since the early days of its
incorporation, reaching a peak in 2019 after the
Financial Times published a series of investigations
along with whistleblower complaints and internal
documents. On 25 June 2020, Wirecard filed for
insolvency after revelations that €1.9 billion was
"missing".
 Products and services
Digitalization of the
retail sector
Wirecard also supports high-
street retail with digitization;
Mobile payments an example of this is the
Wirecard offers consumers collaborative project with T-
the fully digitalized, mobile Systems. In 2016, together
payment-app Boon, which with the WMF Group,
works independently of Wirecard developed
banks or network operators. mobile app which connects
store purchases with online
sales.
Card issuing
Many companies worked with
Wirecard to issue their own
payment cards of various
kinds. mycard2go has been
part of Wirecard Bank's
portfolio since 2010. It is a
a prepaid card which can be
purchased in stores and is
ready to top up following
online activation.

international supplier ecommerce Alternative Chinese

Wirecard is an international Since 2014, Wirecard has payment methods
supplier of electronic offered its Checkout Portal Wirecard has been
payment and risk – a fully automated collaborating with Alipay
management services. application for easily since 2015, to offer
Wirecard offered products connecting different Chinese tourists a familiar
and services in the areas of payment methods in online payment method during
mobile payments, e- shops, with a focus on their travels in Europe
commerce, digitization and SMEs and virtual
finance technology. marketplaces.
Stock listing and relation to InfoGenie AG
stock corporation
Capital increase Wire Card became a stock
Neuer Markt stock against investment Rename corporation listed in the
market December 2004, an to InfoGenie AG by Prime Standard stock
extraordinary general way of a capital market segment through a
shares had been listed reverse IPO. In 2006,
meeting of InfoGenie increase against
since October 2000. decided to transfer the Wirecard was included in
Active as an investment in kind on
non-listed Wirecard, 1 January 2005, and the TecDAX and in
information service whose core business September 2018 in the
to rename InfoGenie
provider offering was real-time payment to Wire Card. DAX.
telephone advice processing on the
hotlines on various Internet including risk
topics. assessment,

1999 2006 2014 2019 2020

International expansion

• Wirecard Asia Pacific was founded in Singapore in

2007.
• In 2008, Wirecard introduced virtual prepaid credit
cards for online payments,
• in the following year a fraud prevention suite for
fraud detection.
• In 2014, Wirecard expanded to New Zealand,
Australia, South Africa and Turkey.
• With the purchase of Prepaid Card Services from
Citigroup, Wirecard has also been represented in
USA since 2016.
• In the same year, the company acquired a South
American Internet payment service provider in
Brazil.
• In 2019, SoftBank invested in Wirecard. With the
acquisition of All Score Payment Services from
Beijing, Wirecard has also been represented in
China since November 2019.
 Infographic
List of subsidiaries Style
operates across all continents worldwide since 2017

It entered the U.S. market in 2017 following completion of the takeover of Citi Prepaid
Services. Wirecard took over the Brazilian company MOIP in 2016. The previous year,
in 2015, it entered the Indian market with the acquisition of the Great Indian Retail Subsidiary company City Country
Group's payment business. Wirecard has been strengthening its operations in the
Asia-Pacific region, the Middle East and Africa since 2014. Wirecard Bank AG Aschheim Germany
Wirecard Technologies Indonesia Jakarta Indonesia
Newcastle upon
Wirecard Card Solutions Ltd United Kingdom
Tyne
Wirecard Central Eastern Europe
Graz Austria
GmbH
Wirecard S.A. Bucharest Romania
Wirecard Ödeme ve Elektronik
Istanbul Turkey
Para Hizmetleri A.Ş.
United Arab
Wirecard Processing FZ LLC Dubai
Emirates
Wirecard Singapore Pte Ltd Singapore Singapore
Wirecard Payment Solutions
Kuala Lumpur Malaysia
Malaysia Sdn Bhd
Wirecard India Private Ltd Chennai India
Wirecard NZ Limited Auckland New Zealand
Wirecard Hong Kong Limited Hong Kong Hong Kong SAR
 Financial data
Financial data in € millions

Year (2014) (2015) (2016) (2017) (2018)

Revenue 601 771 1,028 1,490 2,016

Net Income 108 143 267 260 347

Assets 1,995 2,935 3,482 4,528 5,855

Employees 1,750 2,300 3,766 4,449 5,300

Wirecard announced on 22 June 2020 that financial data for the previous years might be incorrect. According to a report
by the Süddeutsche Zeitung, the public prosecutor's office assumes that the company has manipulated balance sheets
since 2014.
 Wirecard and the Financial
Times controversy

• On 30 January 2019, Wirecard shares plunged

• Beginning in April 2015, the Financial Times blog FT
Alpha Ville wrote a series of blog posts that
questioned Wirecard's business model and criticized
the company's accounting practices.
• In February 2016, the 101-page "Zatarra Report"
appeared, documenting alleged fraud and money
laundering at Wirecard.
• In February 2017, the German Manager Magazine
wrote a lengthy article about Wirecard in which it
alleged misleading reporting practices.
after the Financial Times reported that a senior
executive was suspected of "falsification of
accounts" and "money laundering" and round-
tripping in the company's Asia-Pacific
operations.
• Wirecard issued a statement calling the report
"false, inaccurate, misleading and defamatory".
Wirecard also announced a lawsuit against the
Financial Times for "unethical reporting" and a
lawsuit for market manipulation.
 KPMG’s
special audit

• Wirecard's long time auditor EY failed to verify the

existence of cash reserves in what appeared to be
fraudulent bank statements.
• The special audit also revealed inability to verify
the majority of Wirecard profits from 2016 to 2018.
• During the special audit, Wirecard made
misleading statements to investors, resulting in a
criminal investigation after a complaint was
referred to prosecutors by BaFin.
Scandal
• In 2019, the accounting firm KPMG was hired by Wirecard for an
independent audit to address the mentioned allegations. In March
2020, Wirecard claimed that KPMG concluded that no discrepancy
was determined during the audit.
• However, on 28 April 2020, Wirecard shares tumbled 26% when the
auditor announced that it had not received sufficient documentation
to address all allegations of accounting irregularities. Later on 5
June, Wirecard's headquarters were searched by police as part of a
criminal investigation into potentially misleading statements to
investors by CEO Markus Braun and three other board members
regarding the audit.
• The company then reported on 18 June 2020 that €1.9 billion was
missing in cash from the company's accounts following an audit by
Ernst & Young.
• Braun resigned as CEO the following day to be replaced by James
Freis. Over the two days, the company's stock fell 72%.
• On 22 June 2020, Braun was arrested by German police under
accusations of "inflating Wirecard AG's sales volume with fake
income".
• On 11 September 2020, Freis announced in an email that he had
stepped down from the CEO position after 85 days, with immediate
effect.
 Causes of downfall
Accounting irregularities Third-party acquirers
Wirecard's combined banking and Third-party acquirers are local
non-banking operations makes its companies who process transactions
financial results harder to compare on behalf on Wirecard for clients,
with peers, so the investors had to rely with which Wirecard then pays a
on adjusted version of the financial commission from processing fees.
statements of the company.

Opaque acquisitions and

corporate structure Aggressive attack on critics
Critics point to Wirecard's global Wirecard has a pattern of
acquisitions to mask trouble with unusually aggressive tactics
organic growth by adding revenues towards those who raise
from external sources, a tactic
questions about the company's
referred to as a rollup.
business operations or
accounting.

Artificial inflation of profit Auditing and regulatory failure

accused of creating forged and BaFin conducted multiple
backdated contracts in order to investigations against journalists
artificially inflate profit, creating and short sellers because of
questions as to the reliability of alleged market manipulation, in
Wirecard's balance sheets.€37m was
response to negative media
moved between Wirecard subsidiaries
reporting of Wirecard.
and external businesses, in a practice
known as "round-tripping."
Long-time CEO Markus Braun
subsequently resigned and
was later arrested
Former COO Jan Marsalek was fired
from his position and board seat. He
has since disappeared and is a fugitive
wanted by the German police.
 press release

• On 25 August 2020, the court-appointed insolvency

administrator issued a press release to the effect that
"Under the preliminary insolvency administration, it has
since been possible to stabilize the ongoing business and
create a basis for its continuation."

• The administrator's press release also states that "far-

reaching cuts are therefore necessary in order to make
any kind of continuation possible and to maintain the
option of exploiting Wirecard AG's core business" and
announced the impending layoff of around 730
employees, in addition to all members of the management
board.
Thank You
Any Questions?