◼ BUSINESS Bloomberg Businessweek June 29, 202013MONEY: PHOTO ILLUSTRATION BY 731; GETTY IMAGES (1). BRAUN: KRISZTIAN BOCSI/BLOOMBERG. *BY ESTIMATED EXPOSURE TO A REVOLVING LOAN, ACCORDING
TODOCUMENTSOBTAINEDBYBLOOMBERG.DATA:COMPILEDBYBLOOMBERGmanagementboardandregulatorswasperceived
asanaffront.WirecarddeniedtheFTstory,andthe
leadreporterwastrolledbyshareholderswhowent
into attack mode every time he mentioned the
German company on Twitter. Braun denied any
culpability and as recently as May 17 tweeted that
“when all the noise and dust settles” investors
would again recognize Wirecard’s stellar potential.
And crucially, while Germany’s banking watchdog
probed whether Wirecard had failed to meet its dis-
closure obligations, it banned shorting the compa-
ny’s stock—the first time it had ever taken such a
step—and investigated possible market manipula-
tion by short sellers colluding with journalists.
Wirecard’s shares dropped sharply in the wake
oftheinitialFTreport,thenformorethana year
bouncedupanddownonvariousallegationsof
wrongdoingthatwereinevitablyfollowedbycom-
panyassurancesthatallwasrosy.Braunevenmet
withPaulAchleitner,theheadofDeutscheBank
AG’ssupervisoryboard,todiscussa tieup,and
Wirecardexecutiveslastfallcommissioneda study
byconsultantsatMcKinsey&Co.exploringthe
ideaofWirecardbuyingGermany’sbiggestfinan-
cialhouse.“Wirecardwantedtofakeit untilthey
madeit,andessentiallytheygotcaughtout,”says
FraserPerring,a founderofViceroyResearchand
anearlyshortsellerintheGermancompany.
ThebottomfelloutwhenWirecarddisclosed
themissing€1.9billionandwithdrewitsfinan-
cialresultsforfiscal 2019 andthefirstquarterof
2020.AtWirecard’sheadquartersinAschheim,a
quietsuburbofMunich,phonelineslitupwith
customersterminatingcontracts,andmanyofthe
5,800employeesaroundtheworld—blindsidedby
thenews—startedsendingouttheirrésumés.
Thenextday,twoPhilippinebanksbelieved
tobeholdingthecash,theBankofthePhilippine
IslandsandBDOUnibank,saidWirecardwasn’ta
client.ThePhilippinescentralbanklatersaidthe
fundshadneverenteredthecountry’sfinancialsys-
tem,andWirecardultimatelyacknowledgedthe
moneyprobablydoesn’texist.Moody’sInvestors
Servicecutthecompany’screditratingsixlevels,to
onestepabovethelowesttierofjunk.Braun,who
owned7%ofWirecard,wasforcedtosellshares
hehadpledgedascollateralona $150million loan
he’d taken out to buy the stock. Felix Hufeld, head
of BaFin, Germany’s markets regulator, said in a
June 22 panel discussion that it was “one of the
most appalling situations I’ve ever seen at a DAX
company” and pledged an investigation both of
Wirecard and his agency’s missteps in the case.
“Once we know the facts,” he said, “we will most
certainly sort out potential shortcomings.”Cleaning up the mess will fall to James Freis, who
was named interim CEO. An American who began
his career as an attorney at the Federal Reserve
Bank of New York, Freis later served as director of
the U.S. Treasury Department’s Financial Crimes
Enforcement Network. Since 2014 he’s been at
Deutsche Börse AG—the Frankfurt stock exchange—
most recently as chief compliance officer. In May,
Wirecard hired Freis to run a new department
called “Integrity, Legal, and Compliance,” a posi-
tion he was due to begin on July 1.
His first priority will be to work with a consor-
tiumof 15 bigbanksincludingCommerzbank,ABN
Amro,andBarclaystonegotiateanextensionof
almost$2billion in debt Wirecard had taken out to
finance operations. The company has hired invest-
ment bank Houlihan Lokey Inc. to develop a financ-
ing strategy, and Wirecard has said it’s considering
cost reductions and selling off or shuttering busi-
ness units. In a video released to staff, Freis spoke
about restructuring and ways to “trim the fat” but
didn’t mention the missing money.
The bigger question is whether Wirecard can—or
should—remain in business, says Neil Campling, an
analyst at Mirabaud Securities. Payment processing
and fraud detection, of course, require the trust
of customers, and a company that failed to detect
what appears to be a multibillion-dollar scam in its
own operations might have difficulty in that line of
work. Corporate clients are already jumping ship,
and some people with accounts at the bank have
rushed to withdraw their funds. “Whether it’s quick
or slow, it’s death by a thousand cuts,” Campling
says. “Wirecard has no way back.” �Sarah Syed,
WilliamCanny,andEykHenning▲ BraunTHE BOTTOM LINE The former payments processor for porn
websites joined the benchmark DAX share index, but its stock is
down 90% as it battles allegations of financial shenanigans.▼ Wirecard’s largest
creditors*ABNAmro $226m
Commerzbank 226
ING 226
LBBW 226
Barclays 136
CréditAgricole 136
DZBank 136
Lloyds 136
BankofChina 91
Citi 91▼ Wirecard share price€1000
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