FCA blocks Wirecard as Brussels eyes German regulation

FCA blocks Wirecard as Brussels eyes German regulation

Former CEO Markus Braun was arrested earlier this week after resigning amid the scandal.

Still, the durability of these industries meant the firm survived the early-2000s dotcom crash, and as online commerce became ever-increasingly standardised, and Wirecard's credibility and scale grew in turn.

Wirecard collapsed yesterday, owing creditors nearly US$4 billion (S$5.5 billion) after disclosing a gaping hole in its books, in Germany's worst accounting scandal.

The financial technology company is the first member of Germany's prestigious DAX stock index to go bust, barely two years after winning a spot among the country's top 30 listed companies with a market valuation of US$28 billion.

Marsalek was sacked by Wirecard on Monday after it disclosed that the billions, purportedly held at two Philippine banks which have denied any connection with the German firm, probably did not exist.

Braun, who led Wirecard for 18 years, stepped down last week after auditors Ernst & Young (EY) made an announcement on Thursday about the missing billions from the company's accounts.

Philippine Justice Secretary Menardo Guevarra said on Wednesday that he had instructed state investigators to coordinate with the central bank's anti-money laundering council in investigating Wirecard.

Braun fended off the critics for years before finally calling in outside auditor KPMG late last year to run an independent investigation.

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Wirecard's shares have tanked as mounting accounting irregularities have come to light at the former hot tech German startup, which on Friday called in investment bank Houlihan Lokey to evaluate its options. It's since been confirmed Wirecard has never had any business relationship with Flexi Flex, and a staffer simply copied the company's logo from the internet, and pasted it onto a contract template he completed himself.

"It is frightening how long Wirecard was able to operate without being objected to by the auditors", partner Wolfgang Schirp said.

The scandal has stunned Germany and comes at a time when Europe's biggest economy is already grappling with the deepest recession since World War II because of the coronavirus pandemic.

"With the exception of a small development branch office, no insolvency applications have been filed by Group companies at present".

Some creditors do not, for now, favour tipping Wirecard into insolvency. BaFin boss Felix Hufeld has described the scandal as a "total disaster".

The company has also relinquished control of funds at it banking unit to German regulator BaFin to prevent the cash being used to plug holes elsewhere in the company.

Munich prosecutors may seek Marsalek's arrest, German business daily newspaper Handelsblatt reported.

Wirecard's former chief operating officer Jan Marsalek, who was sacked last week, is believed to have flown to China from the Philippines on 24 June, CNN Philippines reported.

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