- The Wirecard stock dropped 60% after Ernst and Young (EY) said it found lacking evidence for $2.1 billion in cash.
- The company faced controversies throughout the past year.
- FT investigative reports found discrepancies in data across various company subsidiaries.
The Wirecard stock plunged 60% after Ernst and Young (EY) said the company’s $2.1 billion cash reserve might be missing.
EY’s bombshell findings come a month after special auditors at KPMG found lacking evidence of $1.12 billion of payments.
Seven months before that, the offices of Wirecard in Singapore were reportedly investigated amid suspicions of an accounting scandal.
What Happens After a $5.5 Billion Drop in Wirecard’s Market Cap?
In a statement obtained by FT—which first reported about the Singapore scandal in May—EY said an audit is ongoing:
Our audit of Wirecard’s 2019 accounts is ongoing. We have not formed an audit opinion and cannot confirm any conclusions.
Wirecard said it is working with EY to conclusively determine whether a quarter of the company’s cash pile is permanently missing,
Tabby Kinder, a correspondent at FT’s Tax and Accountancy division, criticized the company’s statement. He described Wirecard’s message is “stunning:”
Stunning statement by Wirecard. How can an auditor – who has access to every receipt and document they ask for – be deceived, while a journalist – who has to fight against the company on every detail – can uncover the true picture?
According to financial writer Lionel Barber, the German media are also describing the incident as “one of the biggest financial scandals in post-war history.”
In the past 12 months, the controversies involving Wirecard are as follows:
- October 2019: FT investigation reportedly finds offices in Singapore are investigated.
- May 2020: Special Audit of Wirecard by KPMG finds lacking evidence for $1.12 billion of payments.
- June 2020: EY finds missing evidence for $2.1 billion in cash.
Are Clients Safe?
Wirecard’s prepaid debit card service is well recognized in the financial space. Some of the largest companies across the fintech and crypto sectors use it to operate debit cards.
Kris Marszalek, the CEO of crypto debit card operator Crypto.com, suggests the safety of client funds may differ from company to company.
In the case of Crypto.com, Marszalek said clients’ fiat funds used for the debit cards are held by an Electronic Money Institution (EMI) regulated by the U.K.’s financial authorities:
“Debit cards issued by Wirecard for Crypto.com are fully prefunded. These client fiat funds are held by an EMI institution regulated by UK FCA in segregated client accounts. The funds are held at another bank (not Wirecard) as required by the FCA.”
The next step in to properly conclude the whereabouts of the $2.1 billion cash reserve and ensure the company’s clients can operate safely.
Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com.