31 July 2020
German fintech firm Wirecard's shareholders are taking legal action against Big
Four auditor EY after the scandal currently shaking the company.
A shortfall of €1.9 billion (roughly $2.1 billion) was discovered on Wirecard's books earlier this month by the EY auditor who had refused to sign off the fintech’s 2019 financial report.
This discovery was followed by the resignation of Wirecard’s CEO (now former CEO) Markus Braun, who had lead the firm for almost 20 years and was subsequently arrested by German authorities.
Braun has been accused of misrepresenting over 32% of Wirecard’s assets — inflating over $2.1 billion of a claimed $6.5 billion total company assets.
As CNBC reported on June 26, EY stated that there are “clear indications that this was an elaborate and sophisticated fraud, involving multiple parties around the world in different institutions, with a deliberate aim of deception.”
The EY claimed that “even the most robust and extended audit procedures” would not be able to prevent a “collusive fraud” like this.
Schutzgemeinschaft der Kapitalanleger e. V. (SdK), theGerman shareholders’ association, nonetheless, filed a complaint accusing three (one former and two current) EY auditors of criminal activity for their alleged role in the fraud.
Will Wirecard scandal impact Crypto debit cards? On June 25, Wirecard filed for insolvency due to the sudden shortfall - as the extent of the alleged fraud came to light, its subsidiary Wirecard Card Solutions Ltd., which is responsible for issuing the firm’s debit cards, was eventually suspended by the regulators .
The cryptocurrency industry was somewhat shaken by the scandal, since Wirex, TenX and CryptoPay debit cards are one of many cards issued by Wirecard.
Crypto.com has since returned all funds on the affected debit cards to customers’ crypto wallets and was asked to cease operations for its EU and U.K. cards following regulators' action.
Reportedly, the company's card program is being transferred to a new provider.