Another executive from troubled German fintech Wirecard was arrested yesterday and questioned by German prosecutors. He is the second person from the one-time darling of the European tech sector to be hauled in over a burgeoning scandal involving missing billions.
Wirecard was launched during the first dotcom boom in the late 90’s, as a payment processor, in the early days of online credit card transactions. It listed in 2005 on the Frankfurt exchange, having taken over another listed business, a move which meant it avoided all the usual scrutiny that attends an IPO. It’s core business at the time, as the FT points out was managing payments for online gambling and pornography, at the time very much considered the grey economy.
The spectacular reversal for the business was presaged last month by the revelation from its auditor EY, that €1.9bn allegedly held in a Philippines bank probably didn’t exist.
The company was already subject to ongoing media scrutiny.
On the day that it was supposed to publish its audited results, it instead revealed that is was missing almost 2 billion Euros in cash, a somewhat awkward encumbrance for any business. Not surprisingly its market cap fell 60 percent.
Four days later CEO Marcus Braun was arrested on suspicion of falsifying accounts at the company. He was subsequently released on bail. Braun was first appointed CEO in 2002, ironically after the company had almost gone broke, and he quickly merged it with a rival named Electronic Business Systems.
The scandal has raised questions about regulation in the payment space and the need for a “mechanism to level the playing field” to reduce abuse in the system according to Andrew O’Donnell, Managing Director of Supercharged Stocks in Canada.
O’Donnell made his comments in an interview with Boardroom Media, the publisher of Which-50. He said, “There’s a significant amount of money that’s just kind of vanished from it. This is part of the problem with some of these Fintech companies. It is very sophisticated stuff. I like to think I’m fairly well versed in a lot of these things but the level of intricacy is pretty intense.”
While suggesting he is not personally a big fan of over-regulation, O’Donnel said, “There has to be some way or some mechanism to level the playing field and make it fair [so] that you don’t have a situation where abuse, like that, can go on, whether it’s with crypto or some sort of wallet.”
Fed Coin whispers
He also said that there are ongoing whispers that the US Federal Reserve is talking about a ‘Fed coin’ of some kind.
“I believe it was about 10 days ago or two weeks ago, there were some rumblings about them looking at some type of crypto for LIBOR rates,” said O’Donnell.