FRANKFURT – An accounting scandal at one of Germany’s fastest-growing blue-chip companies has raised doubts about the national financial watchdog and, coming on top of other high-profile cases of fraud, led to questions about the country’s ability to oversee its corporate titans.
Some 1.9 billion euros ($2.1 billion) vanished from payment systems provider Wirecard, until recently heralded as Germany’s emerging giant of the financial tech sector. Its CEO was arrested on suspicion of market manipulation and inflating financial numbers. And on Thursday the company said it was filing for insolvency, a form of bankruptcy protection.
Adding to the damage to Germany’s corporate reputation was the reaction of the financial regulator, BaFin, when media reports last year questioned the company’s accounting. Rather than investigate Wirecard, it targeted investors, banning them from betting on a drop in the share price, which plunged more than 40%.
“That is a documented failure of supervision to intervene when there was clear evidence in this case,” Florian Toncar, a member of parliament for the opposition Free Democratic Party, said in an interview on Norddeutscher Rundfunk public radio.
He said the case was “a heavy blow” for Germany’s reputation as a financial center.
“WireCard was until now one of the few functioning tech companies that have come up with new ideas in the market place and now it turns out that that was to a great extent smoke and mirrors.”
BaFin’s head, Felix Hufeld, has conceded that Wirecard’s implosion was “a disaster.” But the agency is standing by its decisions throughout the scandal, details of which are still emerging.
Wirecard provides the technology to companies and consumers to make cashless payments, a growing and competitive market globally. Its founder and CEO, Markus Braun, resigned last week and said “it cannot be ruled out” that the company could have been the victim of fraud.