German financial services juggernaut taken down by €1.9bn accounting scandal.
Less than a week after its CEO Markus Braun resigned and was later arrested, Wirecard this morning filed for insolvency with German regulators.
The move comes amidst a major accounting scandal which found €1.9bn missing from the company’s accounts.
In a brief statement on its investor relations page today Wirecard said:
“The management board of Wirecard AG has decided today to file an application for the opening of insolvency proceedings for Wirecard AG with the competent district court of Munich (Amtsgericht München) due to impending insolvency and over-indebtedness.”
What this means for the many fintechs which use the payment processing and card issuing giant’s services is unclear.
As has been pointed out, many of the UK fintechs which rely on Wirecard technically run on Wirecard Card Solutions (WCS), a UK subsidiary of the German group formed in the wake of Brexit.
This should give them safety in knowing that WCS operates under a separate regulatory regime and that funds should be ringfenced with partner banks.
Yesterday WCS wrote to its UK customers reiterating that funds are held by ring-fenced accounts and not by WCS, and that these funds aren't mixed with Wirecard's own funds.
"These regulations are designed to ensure that customer funds are ring fenced in segregated accounts to safeguard them against any other claims by third party creditors of WDCS; and to ensure the funds are not comingled with the working capital or assets of WDCS," WCS wrote in its letter to customers.
However, given the chaos and the fact that the parent company is still assessing whether WCS will also have to file for insolvency, lots of questions remain unanswered.