Former Wirecard CEO Arrested
Former Wirecard WDI AG Chief Executive Markus Braun was arrested by German police after the company discovered a $2 billion discrepancy in its books, according to the Wall Street Journal.
Braun turned himself in late Monday after being accused of “inflating Wirecard AG’s sales volume with fake income.” On Tuesday, he was released on $5.7 million bail. Braun served as Chief Executive at the company for almost 20 years before abruptly resigning last Friday. The arrest is the newest news in the progressive fraud case being brought against Wirecard. Last week, auditors stated that they were unable to verify some of the company's money existed.
The investigation is looking into third-party acquirers that process payments for Wirecard and may be connected to the $2 billion hole in the books. Furthermore, Braun is also suspected of making the company more attractive to investors and cooperating with perpetrators. Chief Operating Officer Jan Marsalek, a long-time associate of Braun, was fired from the company on Monday.
Braun is scheduled to appear before an investigating judge today to determine the extent of his detainment. Wirecard's shares have lost over 85 percent of their value over the past three days but bounced back Tuesday morning. Hedge funds have been betting against the company for years as rumors of fraudulent accounting practices spread around Wall Street. Germany's financial regulator, BaFin, admitted that it had made mistakes monitoring the business and called it a disaster.
Last October, Wirecard appointed KPMG AG to audit the business. Third-party acquirers became the focal point of the audit as KPMG looked into their practice of processing payments for Wirecard in countries where it wasn't fully licensed to operate. However, KPMG was unable to answer questions about Wirecard's relationship with these third-party acquirers. The fraudulent practices may have been going on for years and the $2 billion under question is equal to the net income Wirecard has reported over the decade.
For years, Braun denied any wrongdoing at the company. In March and April, the company informed investors that the KPMG special examination had no substantial findings.