Shares in German payment processor Wirecard have crashed after auditors Ernst & Young reported spurious cash balances reported by a third party and insufficient evidence of EUR1.9 billion in escrow accounts held with two Asian banks.
Wirecard issued a statement saying that there were indications that the trustee to the accounts had attempted “to deceive the auditor and create a wrong perception of the existence of such cash balances”.
The share price fell through the floor on the news, dropping by 66% as markets responded to the latest setback to the troubled firm, which has already delayed its annual report on three previous occasions as allegations about financial impropriety swirled.
The Financial Times reported in October that Wirecard staff appeared to have conspired to fraudulently inflate sales and profits at subsidiaries in Dubai and Dublin and mislead EY, the group’s auditor for a decade.
Markus Braun, CEO Wirecard states: "We are in contact with the trustee present on site. Previously issued confirmations by the banks were no longer recognised by the auditor. All parties involved are endeavouring to clarify the matter as quickly as possible. It is currently unclear whether fraudulent transactions to the detriment of Wirecard AG have occurred. Wirecard AG will file a complaint against unknown persons."
Late in the day, Wirecard suspended chief operating officer Jan Marsalek and brought forward the already announced appointment of James Freis to take charge of a newly created department 'Integrity, Legal and Compliance'.
UPDATE: In a video staement releases Friday, Wirecard chief Braun said: "At present it cannot be ruled out that Wirecard has become the aggrieved party in a case of fraud of considerable proportions."