Wirecard‘s former CEO Markus Braun resigned and turned himself in, shortly after auditors failed to locate €1.9 billion ($2.1 billion) in revenue, and after the company admitted that the account balances most likely "do not exist."
The Austrian citizen reported himself to Munich prosecutors on Monday evening, travelling to the German city from his home in Vienna after a judge issued an arrest warrant.
Prosecutors said that Braun that led Wirecard for nearly two decades, was arrested on suspicion of false accounting and market manipulation.
He is accused for inflating Wirecard’s balance sheet and revenues “through feigned income from business”, in order to portray Wirecard as financially stronger in a bid to solicit more money from both customers and investors.
Following the announcement of the missing billions, Wirecard stock crashed almost 90%, with more than $12 billion wiped from its market value, in just three days.
That number withdrew the company's full-year-2019 and first-quarter-2020 results.
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Before his resignation, Braun told investors that Wirecard might have become the victim of “fraud of considerable proportions”, and Wirecard announced that it is "working intensively together with the auditor towards a clarification of the situation".
It started when Braun, the former consultant at Contrast Management Consulting GmbH and KPMG Consulting AG, joined the management board of Wirecard AG and became CEO and CTO of the company, and turned Wirecard into one of Europe’s hottest investments.
Under his lead, Wirecard became one of the world's largest digital platforms in the area of financial commerce. It was also considered one of Germany's Top 30 most valuable companies on the German stock market (DAX), and has been ranked in the “Top 100 Most Innovative Growth Companies in the World” by Forbes Magazine.
Braun that also led Wirecard to replace Commerzbank in the DAX 30 index in 2018, was respected by many by professionals in Germany. He was even considered a tech visionary.
Braun promised Wirecard would be at the forefront of a world where notes and coins were obsolete.
Until this date, Braun was the longest-serving CEO of a DAX company, and also a billionaire with his 7% stake in the group. Its peak was in the summer of 2018, when Wirecard had a market value of more than €24 billion.
After his resignation, all what Braun said and done were in question.
In 2017, for example, Braun told investors that Wirecard was using the AI to analyse data. But according to documents reported by news agencies, Wirecard employees were actually the ones who went through the spreadsheets of customer information. And also in 2017, Braun was reported borrowing €150 million from Deutsche Bank, pledging his shares as collateral for a margin loan. According to people familiar with the matter, he later moved the loan to a different lender.
With Braun resigning, he sold a large chunk of his shares in Wirecard.
In 2020, after Wirecard delayed announcing its annual financial statements on a number of occasions, regulators started clamping down the company.
Germany’s financial watchdog BaFin has sought to ringfence Wirecard Bank, the lender that the payments group has owned, after auditing firm Ernst and Young said that there was insufficient evidence to prove the existence of bank balances of over €1.9 billion in trust accounts.
With Ernst and Young refusing to sign off on the company’s 2019 accounts, Wirecard quickly plunged into crisis.
“There is a prevailing likelihood that the bank trust account balances in the amount of €1.9 billion do not exist,” the German company said in a statement.
Felix Hufeld, BaFin president, said that "a whole range of private and public entities including my own have not been effective enough" at preventing the "complete disaster" at the German payment processor and financial services provider.
A day after the arrest, a Munich judge released Braun from custody on a €5 million ($5.6 million) bail.
Prosecutors said that they were continuing to investigate the rest of the company's former management board. This includes Chief Operating Officer Jan Marsalek who was fired.