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INSIGHT GERMANY - WIRECARD


Marsalek built up an international network of companies, which form the core of what appears a sophisticated Ponzi-style scheme.


THE FALLOUT IN GERMANY


On June 22, 2020, German DAX-listed Wirecard AG (Wirecard) had to admit to the high probability that alleged bank balances on trust accounts in the amount of €1.9bn did not exist. Te auditors EY had already considered this possibility a few days earlier and refused certification for Wirecard's 2019 accounts.


Te price of Wirecard shares fell to almost zero within a few days. Te German Federal Financial Supervisory Authority (BaFin) launched an investigation and criminal proceedings were initiated against the parties involved, including the auditors. Wirecard filed for bankruptcy on June 25 due to impending illiquidity and over- indebtedness.


In addition to the obvious inconsistencies at Wirecard, the role of the auditors at Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft (EY) is also been investigated. EY has been auditing Wirecard's annual financial statements since 2012 and, despite repeated signs of irregularities, issued unqualified audit certificates to the company until 2018. EY is being accused of inaction over the accounting irregularities and for failing to check Wirecard bank statements for three years.


Lawmakers in Germany grilled Finance Minister, Olaf Scholz, and Economics Minister, Peter Altmaier, at a closed-door meeting of the parliament’s finance committee in July. Following the meeting, Mr. Scholz presented a reform plan to strengthen financial oversight of companies in Germany after markets watchdog BaFin came under fire for failing to act on tips and suspicions raised about Wirecard for over a decade. Te plan would give BaFin greater investigative powers.


Numerous high-ranking politicians, including Chancellor Angela Merkel (Christian Democratic Union, CDU) and Vice-Chancellor Olaf Scholz (Social Democratic Party, SPD), are also involved in the affair. As recently as September 2019, when reports of irregularities had been circulating at Wirecard for four years, Ms. Merkel was heavily promoting the group on a business scouting trip to China.


As finance minister, Mr. Scholz is responsible for BaFin, which failed to properly scrutinise Wirecard for years and failed to act on reports of opaque money flows and possible balance sheet forgeries at Wirecard since 2015. In fact, rather than investigate, BaFin issued a ban on short sales and filed criminal charges in 2019 against journalists, whom it accused of manipulating the share price by negative reporting.


Scholz’s state secretary, Jörg Kukies, a former banker at Goldman Sachs, met with Wirecard


P36 NEWSWIRE / INTERACTIVE / MARKET DATA


In addition to the obvious inconsistencies at Wirecard, the role of the auditors at Ernst & Young GmbH


Wirtschaftsprüfungsgesellschaft (EY) is also been investigated. EY has been auditing Wirecard's annual financial statements


since 2012 and, despite repeated signs of irregularities, issued unqualified audit certificates to the company until 2018. EY is


being accused of inaction over the accounting irregularities and for failing to check Wirecard bank statements for three years.


CEO Braun for confidential talks as late as November 2019 and several high-ranking German and Austrian politicians were in close contact with Wirecard or were active as lobbyists for the corporation.


THE WIDER SCOPE OF THE AFFAIR


Te fallout from the scandal is not restricted to Germany. Account holders in multiple markets have seen their accounts frozen and face issues


retrieving their funds, while investors in the company look set to lose fortunes on the shares and loans granted to the business.


Fallout on the gaming sector has been relatively low-key at this stage. However, in addition to the latest breaking news concerning Wirecard's transaction processing past with CenturionBet, GVC was also forced to make a statement on July 30, refuting claims linking it with Wirecard. Newspaper reports claimed that the UK tax


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