Wirecard Ex-C.E.O. Arrested on New Charges of Defrauding Banks

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The former chief government of Wirecard was arrested Wednesday on new costs after prosecutors in Munich mentioned they’d uncovered proof that the bancrupt funds firm had used false accounting to defraud collectors of $3.7 billion.

The accusations considerably improve the dimensions of the monetary wreckage left by Wirecard, and can add to the strain on German regulators and outdoors auditors who did not uncover irregularities regardless of warning indicators going again greater than a decade.

Markus Braun, the previous chief government, and two different former Wirecard executives had been arrested early Wednesday after prosecutors “significantly widened” their investigation of the corporate, Anne Leiding, a spokeswoman for the Munich State’s Attorneys Office, instructed reporters.

Mr. Braun, who has contested the fees, had been free on bail since an earlier arrest on suspicion of accounting fraud and market manipulation in June, quickly after Wirecard admitted that 1.9 billion euros, or $2.1 billion, that it claimed to have on its stability sheet in all probability by no means existed. He and two others, a former chief monetary officer and a former head of accounting who had been recognized solely by their initials, remained in custody after being introduced earlier than a choose on Wednesday, Ms. Leiding mentioned.

Authorities are additionally looking for Jan Marsalek, the previous chief working officer of Wirecard. The German newspaper Handelsblatt reported this week that he could be in Russia, the place, it mentioned, he was believed to have contacts in intelligence circles.

The new costs, together with organized fraud and market manipulation, are primarily based on proof that Wirecard falsely inflated its gross sales and earnings to safe loans price €3.2 billion, or $3.7 billion, from banks in Germany, Japan and different international locations, Ms. Leiding mentioned.

“Because of Wirecard’s insolvency,” she mentioned, the cash has “very likely been lost.” She didn’t establish the banks.

Shareholders of Wirecard, which was listed on Germany’s blue chip DAX index, have already misplaced most of their cash. Shares within the firm, which processed digital funds and portrayed itself as a fast-growing expertise agency, offered for greater than €190 at their peak in 2018. On Wednesday, they had been buying and selling at €1.80.

People questioned within the case have described a conspiracy that operated in accordance with “a strict hierarchy, marked by esprit de corps and oaths of loyalty to the chief executive as leader,” Ms. Leiding mentioned. The three executives arrested and others within the conspiracy knew at the very least by 2015 that Wirecard was dropping cash, she mentioned.

“We are also asking ourselves how such a system could be established,” Ms. Leiding mentioned.

The case has been a humiliation to the German authorities. Olaf Scholz, the finance minister, is scheduled to look earlier than a parliamentary committee subsequent week to reply criticism that he did not act on indicators of irregularities at Wirecard that he was knowledgeable about as early as final yr.

The European Securities and Markets Authority, which oversees the European Union monetary system, mentioned final week that it could scrutinize Germany’s banking and accounting regulators after Wirecard uncovered attainable shortcomings.

Shareholders are suing EY, previously often known as Ernst & Young, claiming the consulting agency did a foul job auditing Wirecard’s books. EY has mentioned it was additionally a sufferer of the fraud.

Ms. Leiding of the prosecutor’s workplace on Wednesday referred to as for different witnesses with inside info to return ahead. The longer they wait, she mentioned, the much less probably they’re to get credit score for cooperating.

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