Germany's Wirecard faked client data to gain £900 mn from SoftBank: Report

Collapsed fintech firm has admitted that half of its revenues and cash worth 1.9 billion euros is missing from accounts

German fintech giant Wirecard, before it collapsed in 2020, allegedly forged client data and internal records to secure 900 million euros as investment from Japanese conglomerate SoftBank, said a media report on Monday.

Wirecard allegedly cited SoftBank’s assistance to secure a separate funding of 500 million euros, UK’s Financial Times (FT) reported citing whistleblowers. The German company collapsed on June 25, 2020, and filed for insolvency admitting that half of its revenues and cash worth 1.9 billion euros were missing. It is considered the biggest financial fraud in Germany since Volkswagen’s ‘dieselgate’ crisis of 2015. Wirecard was once among the top 30 most-valued firms on the Frankfurt Stock Exchange and valued at $28 billion.

What went wrong at Wirecard?

FT reported in 2019 that Wirecard's partners in Manila, Singapore and Dubai were obscure and accounted for half of its revenues. The whistle-blowers alleged the company had used fake sales transaction figures to inflate its revenue and profits.

Subsequently, KPMG was appointed as the outsider auditor to run an independent probe. The consultancy firm reported in 2020 it could not verify cash balances worth 1 billion euros. On June 19, 2020, Wirecard's CEO Markus Braun stepped down from his post.

EY, which had been the company's auditor for over a decade, reported that month it could not verify balances worth 1.9 billion euros. It accounted for a quarter of Wirecard's whole balance sheet. The company insisted that the money had been sent to banks in the Philippines. However, Germany's central bank stated that the money never entered the country's monetary system. Braun was arrested on June 23.

On June 25, when the company filed for insolvency, it owed 3.5 billion euros to its creditors.

Did Wirecard deceive SoftBank?

According to FT, SoftBank officials were shown a fake client list by Wirecard in 2019. In the same year, a similar deception was planned for the KPMG special audit. The company's head of accounting, Stephen von Erffa, reportedly admitted to forging the documents during the KPMG audit. He told German prosecutors that Braun was under the impression that the spreadsheets were authentic.

Braun and two former managers are expected to face a trial later in 2022 for charges of fraud, market manipulation and breach of trust.