The saga surrounding the closure of credit card manufacturer Wirecard is still unfolding. Now, it would appear that other company partners are being roped into the situation. Earlier this week, reports confirmed that the FinTech company’s shareholders were getting ready to take legal action against Ernst & Young (EY) over the company’s role in the entire saga.
The Hunt for More Information
One of the largest auditing firms in the world, EY is the official auditing partner for Wirecard. Last week, CNBC reported that Wirecard’s shareholders’ association, Schutzgemeinschaft der Kapitalanleger e. V. (SdK)., had filed lawsuits against three auditors from the firm. The shareholders seek answers concerning how such a fraudulent operation could have happened under EY’s watch.
Wirecard’s problems began earlier this month, when the Financial reported that several of the company’s top workers had orchestrated an elaborate fraud. Per the report, auditors from EY couldn’t confirm the origins of cash balances to the tune of €1.9 billion (about $2.1 billion).
Shedding more light, the Financial Times reported that several of the German company’s staff – particularly in Dubai and Dublin – had reported false profit and sales numbers for almost a decade. The funds that were now missing represented about 32 percent of the company’s entire assets, which it claimed were worth 5.8 billion euros ($6.5 billion).
Wirecard eventually published a statement explaining that one of its trustees had attempted to deceive EY auditors and falsely indicate the existence of the cash balances.
On Thursday, the German company’s outrage was too much, and it had no choice but to file for insolvency. The Wall Street Journal reported that the company powered most of the crypto debit cards in circulation, although it had been dealing with some crippling debts over time. The debts, in addition to the $2.1 billion fraud, meant that it couldn’t continue operating without help.
The Wirecard Fallout Continues
Speaking with CNBC, EY representatives explained that Wirecard had been involved in an “elaborate and sophisticated fraud.” The auditing giant pointed out that the scheme involved several parties worldwide, all working to deceive shareholders and customers. The company also tried to salvage its reputation and deflect from the attention that it now got. As the report explained, EY pointed out that even the most robust audit procedures wouldn’t have uncovered the “collusive fraud.”
This saga has also severEly affected crypto debit card owners. On June 26, the United Kingdom’s Financial Conduct Authority (FCA) suspended Wirecard Solutions Ltd., the company’s subsidiary that issues debit cards. Several companies that rely on the company are now facing functionality cuts, with user funds being stranded.
As for Wirecard itself, there’s hardly a way for the company to come out of this. The Journal reported during the insolvency filing that this wasn’t necessarily the end. However, each new revelation concerning the case brings the chances of the firm surviving this much lower.