(July 3): On June 18, Markus Braun, the CEO of beleaguered German FinTech firm Wirecard, walked into the criminal prosecutor’s office in Munich and surrendered himself. The 50-year-old Braun, an Austrian, co-founded Wirecard in late 1999 at the height of the dotcom bubble. After several pivots and acquisitions, Wirecard morphed into a key cog in the global financial transactions technology supply chain. Yet, for some years now, the payment firm has been embroiled in a massive accounting scandal and the subject of a long-standing investigation by a team of Financial Times reporters. Last week, Wirecard’s carefully constructed house of cards came tumbling down as it filed for bankruptcy.

Wirecard’s collapse comes just as the global FinTech sector is at an inflection point and set to drive major digital transformation in the financial services industry. Global FinTech revenues are expected to surpass US$265 billion ($369 billion) in 2025, according to a recent UBS report. Wirecard had been due to release its financial results for 2019 and the first quarter of 2020 on June 18. Instead, it admitted that it had “mischaracterised” its biggest business and that “previous financial statements may be inaccurate”. Auditor EY conceded that it could not find EUR1.9 billion ($3 billion), thereby unravelling the biggest accounting fraud since energy conglomerate Enron went belly up in 2002.

Accounting irregularities at Wirecard date back years. Essentially, it was pumping up its revenue numbers to please investors and keep its high-flying stock price airborne. Massaging revenues is one of the oldest tricks in the arsenal of fledgling digital firms. Wirecard just did it very well and successfully hid it for years. Given the complexity of the scam and the use of “third-
party” partners in Dubai, Singapore and Manila to inflate revenues, it is highly unlikely that Braun would have been able to pull it all off alone. Several other executives accused of inflating Wirecard’s balance sheets and deliberately misleading investors to boost its stock price are under investigation.

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