UPDATED – Wirecard Fraud: A Timeline of Events

Wirecard has filed for insolvency amid multiple probes. BaFin faces scrutiny for mishandling clear red flags. EY faces lawsuits for failing to catch the improprieties earlier. 

The Financial Times first started reporting accounting violations and possible money laundering at Wirecard in January 2019, prompting a raid of the company’s premises by the Singapore police. German regulator BaFin is also said to have received documents on Wirecard from an anonymous source in late January 2019, which it evaluated alongside the FT allegations.

In February 2019, a criminal investigation was launched in Germany against FT journalist Dan McCrum for suspected market manipulation, and BaFin prohibited short selling of Wirecard shares for two months.

Allegations of improprieties at Wirecard continued until Founder and CEO Markus Braun ordered a special audit of the company seeking to put the allegations to bed. In April this year, KPMG published a report on its special audit, saying it could not independently confirm EUR 1 billion in cash balances.

Wirecard has now filed for insolvency and multiple probes have been launched against the company. Meanwhile, BaFin is facing scrutiny for its handling of the allegations against Wirecard last year, and EY faces lawsuits for failing to catch the improprieties earlier.

Below is a timeline of events:

5 June (Friday) – Wirecard’s Munich headquarters were searched by police following a criminal complaint by BaFin into potentially misleading statements made by CEO Markus Braun and other board members to investors ahead of the KPMG audit results.

18 June (Thursday) – Auditor EY refused to sign off on Wirecard’s 2019 accounts as it was unable to confirm the existence of USD 2.1 billion in cash balances in trust accounts at two Philippines banks; Founder and CEO Markus Braun cut his stake in Wirecard from 8.04% to 4.94%.

19 June (Friday) – CEO Markus Braun resigned, replaced by ex-Federal Reserve Bank of New York attorney James Freis.

21 June (Sunday) – The BSP (Bangko Sentral ng Pilipinas) said the missing USD 2.1 billion never entered the Philippines. BDO Unibank and Bank of the Philippine Islands said the documents provided to EY were forgeries and that Wirecard was not a client.

> ALSO READ: BaFin Efficacy Called into Question for Wirecard Handling (22 Jun 2020)

22 June (Monday) – Markus Braun was arrested; Wirecard said the missing USD 2.1 billion likely “does not exist” and withdrew its preliminary financial results for 2019 and the first quarter of this year; Former chief operating officer Jan Marsalek was fired.

BaFin President Felix Hufeld issued an apology, saying that it was among institutions responsible for the “complete disaster” at Wirecard because it didn’t do a good enough job supervising. He defended the February 2019 ban on Wirecard short sales, saying BaFin had to act because it suspected market manipulation and insider trading.

23 June (Tuesday) – MAS (Monetary Authority of Singapore) ordered Wirecard’s entities in Singapore to keep customer funds from local activities in local banks; Markus Braun posted bail of EUR 5 million euros and was released; German minister for economic affairs Peter Altmaier demanded a full investigation into Wirecard; Philippine lawyer Mark Tolentino identified as a Wirecard trustee claimed that he is a victim of a frame-up and identity theft.

24 June (Wednesday) – The Philippines launched an investigation into the missing USD 2.1 billion that Wirecard said it deposited in two Philippine banks. Investigators were said to be searching for ex-COO Jan Marsalek who was believed to be in the Philippines.

25 June (Thursday) – Wirecard said it was filing for insolvency at a Munich court “due to impending insolvency and over-indebtedness” (estimated USD 3.5 billion in debt, including USD 1.3 billion due within a week) and was considering filing for insolvency for its subsidiaries. Wirecard became the first DAX company in history to go out of business.

EY said there are clear indications of an elaborate and sophisticated fraud involving multiple parties around the world “with a deliberate aim of deception”. While it was completing the 2019 audit, EY was provided with false confirmations of cash balances at escrow accounts, which it reported to relevant authorities.

26 June (Friday) – The FT revealed that EY did not independently confirm EUR 1 billion in Wirecard cash balances at OCBC Singapore for three years, instead relying on documents and screenshots provided by a third-party trustee and Wirecard itself. Germany’s accounting watchdog FREP (Financial Reporting Enforcement Panel) is probing Wirecard’s balance sheet, and its auditor oversight body APAS has begun looking into EY’s work. EY faces a class action lawsuit and criminal complaints from shareholders and bondholders.

European Commission executive vice president Valdis Dombrovskis said he would ask ESMA (European Securities and Markets Authority) to investigate whether BaFin failed in its supervisory duties and report back by 15 July. Based on the findings, a formal investigation may be launched; The UK FCA (Financial Conduct Authority) ordered Wirecard not to dispose of any assets or funds, and to not carry on any regulated activities.

27 June (Saturday) – Philippine investigators reveal they are probing about local partners of Wirecard as persons and entities of interest.

28 June (Sunday) – The German government said it will terminate its contract with FREP and hand the power to launch investigations into companies’ financial reporting to BaFin. In early 2019, BaFin had asked FERP to open an investigation into Wirecard but only one official was overseeing the case, and making little progress.

29 June (Monday) – The FCA allowed Wirecard to resume issuing e-money and providing payment services to allow customers to access their money, while maintaining other restrictions on the company; MAS said it is working with ACRA (Accounting and Corporate Regulatory Authority), local law enforcement and foreign authorities in a criminal investigation to determine if Wirecard exploited Singapore’s financial system for illicit purposes.

30 June (Tuesday) – Two investor class actions are being prepared to sue Germany for billions of euros over Wirecard losses;

1 July (Wednesday) – 12 prosecutors, 33 police officers and IT specialists raided Wirecard’s Munich headquarters and four other German and Austrian properties amid as part of a widening probe into the company; Authorities in Mauritius launched an investigation into Wirecard for potential AML/CFT violations for 2015 acquisition of Indian payments business Hermes.

BaFin president Felix Hufeld testified to German parliament members that his agency could not have done more to supervise Wirecard because it was classified as a technology company rather than a financial services provider. He denied that BaFin sought to protect Wirecard with its February 2019 short-selling ban, saying its duty was to “safeguard the integrity of the market”. Hufeld also said ESMA has “no right” to carry out a probe into BaFin.

2 July (Thursday) – A short-seller was said to have shared documents and information with the FCA in early 2019 about Wirecard’s involvement in a “transaction laundering” scheme to process gambling proceeds that would have otherwise been blocked; Deutsche Bank said it is “in principle prepared” to provide financial support to Wirecard Bank, the ring-fenced deposit-taking unit of the Wirecard payments group, in coordination with BaFin.

German accounting watchdog FREP denied blame for failing to spot problems at Wirecard, after it was asked last year to examine the company’s accounts, but has yet to produce a report on its findings. FREP said its powers were limited compared to state agencies.

3 July (Friday) – MAS probe has led to an investigation of two companies alleged to have been involved with Wirecard, one in a trustee capacity, the other as an outsourced payments processing partner; BNM (Bank Negara Malaysia) has ordered Wirecard’s Malaysia unit to take measures to “ensure uninterrupted settlement of payments to merchants” and, should the need arise, facilitate the smooth transfer of payment services to alternate providers.

4 July (Saturday) – Philippine immigration records showing Wirecard ex-COO Jan Marsalek entered the country on 23 June were reportedly found to have been faked. Marsalek had oversight of Wirecard’s Asian operations, which are at the centre of suspicion by auditors and prosecutors of attempts to falsely inflate cash balances, turnover and profit.

6 July (Monday) – A special audit by KPMG conducted last year has revealed that Wirecard’s core business in Europe and the Americas has been loss-making since 2016, but this was masked by so-called outsourced activities in Asia.

7 July (Tuesday) – German prosecutors have arrested Oliver Bellenhaus, the head of Cardsystems Middle East, a Wirecard subsidiary in Dubai, on suspicion of conspiracy to commit fraud, attempted fraud, and aiding and abetting other crimes; Mastercard claims to have been warned about Wirecard links to an alleged laundering network in 2016; More than 100 potential bidders have reportedly flagged their interest in buying parts of Wirecard.

8 July (Wednesday) – The US Department of Justice and FBI are jointly investigating Wirecard’s role in an alleged USD 100 million conspiracy with third-party payment processors to trick US banks into approving credit card payments for marijuana products; German state prosecutors are investigating Wirecard executives for suspected money laundering, with the oldest of the cases dating back to 2010.

10 July (Friday) – The UK FCA has released new guidance toughening rules for payment providers and e-money companies on safeguarding customer funds and record-keeping – in response to the Wirecard collapse.

14 July (Tuesday) – BaFin filed a complaint with Munich prosecutors over alleged insider trading in Wirecard shares by an investment vehicle of the former chief executive Markus Braun.

15 July (Wednesday) – ESMA said it is launching an assessment of the supervisory response by BaFin and the FREP to the events leading to the collapse of Wirecard. The assessment will be completed by 30 October 2020; The WSJ has discovered that some of the partnerships announced in recent years were misleading or promoted without the agreement of the companies; A UK court has dismissed a case of alleged fraud over Wirecard’s 2015 acquisition of Indian payments business Hermes.

17 July (Friday) – Deutsche Boerse has proposed a new rule allowing it to expel a company from the DAX two days after it files for insolvency. If the proposal is adopted, Wirecard could be expelled from the DAX a month early; Oliver Bellenhaus, the head of Wirecard’s Dubai subsidiary Cardsystems Middle East, has reportedly admitted to wrongdoing.

20 July (Monday) – Reports emerged that Former Wirecard chief operating officer Jan Marsalek has fled to Russia with a cache of bitcoins and is allegedly being protected by the Federal Security Services.

21 July (Tuesday) – UK members of parliament plan probe Wirecard’s collapse to establish whether a similar scenario could unfold in the UK fintech sector.

22 July (Wednesday) – Former CEO Markus Braun has been re-arrested and his EUR 5 million bail revoked, amid criminal allegations that he knew about Wirecard fraud since 2015 and agreed to inflate the company’s revenue to deceive investors. Two others, former CFO Burkhard Ley and chief accounting officer Stephan Freiherr von Erffa, were also arrested.

24 July (Friday) – Germany’s Federal Ministry of Finance has reportedly announced a plan to grant BaFin sovereign powers that will allow it to intervene immediately in publicly-traded companies; Wirecard investors have reportedly filed a lawsuit against BaFin, saying the regulator neglected its duties to investigate evidence of an accounting fraud that led to the company’s collapse.

Philippine investigators have identified dozens of people and entities of interest in their probe into Wirecard, including two ‘rogue’ bank employees who are in focus for allegedly facilitating the multinational accounting scandal.

29 July (Wednesday) – German Finance Minister Olaf Scholz and Economy Minister Peter Altmaier reportedly testified before a closed-door parliamentary hearing that no mistakes were made in the course of supervising Wirecard, but that financial oversight must be strengthened.

30 July (Friday) – German authorities are reportedly seeking assistance from Russian official to apprehend former Wirecard chief operating officer Jan Marsalek; A Mastercard executive is alleged to have been involved in a money laundering operation with links to Wirecard while he was working at Cyprus-based FBME Bank.

3 August (Monday) – Wirecard was discovered to have processed payments for a Maltese online gambling company that laundered millions of euros for the ’Ndrangheta, one of Italy and Europe’s most powerful mafia organisations; Germany’s auditing regulator is reportedly examining all of EY’s audits of Wirecard from 2015.

4 August (Tuesday) – BaFin announced it will conduct an audit of accounts covering Wirecard’s past few years, after FREP said the company refused to accept an error it had found or cooperate with the watchdog.

7 August (Friday) – Singapore authorities have charged an officer at Citadelle Corporate Services for falsifying balances held in escrow on behalf of Wirecard; German lenders Commerzbank, ING Group and Credit Agricole have reported earnings, writing down a total EUR 460 million in exposures to Wirecard.

More to come …

Anything we missed? Email [email protected].

To Top