Spiegel und FT

WireCard shares under pressure – EY refused to approve WireCard Singapore accounts

The listed German Fintech company WireCard has an issue. More precisely, it has more than one issue. First of all, there are unresolved questions about allegedly incorrect accounting entries and incorrect financial statemetns. There are also issues with allegedly non-existent customers and fictitious companies. But the real problem is that WireCard is evidently on the list of “to-be-investigated” companies of the Financial Times. The charges filed by WireCard against the reporters of the Financial Times certainly did not help. But the accusations of the Financial Times could indeed have substance.

Most recently, it became known that EY refused to confirm the financial statements of WireCard Singapore Pte Ltd for 2017. Strangely enough, Ernst & Young did not mention this in the audit report for WireCard’s parent company. It looks as if Ernst & Young also has a problem. A big problem.

The Singapore issue

WireCard, promoted to the DAX blue-chip index last year, has been the target of a series of investigative reports by Financial Times (FT) reporter Dan McCrum, with the latest, on Oct. 15, knocking more than 20% off its share price. , with the latest, on Oct. 15, knocking more than 20% off its share price. Additionally, FT Claimed that Wirecard’s senior finance team had sought to inflate reported sales and profits at its businesses in Dubai and Ireland, Reuters reported.

An investigation by an outside law firm found no evidence of criminal wrongdoing by head office, although Singapore staff may have broken local laws, Wirecard said at the time.

As a matter of fact, however, the auditors of Ernst & Young (EY) have denied the Singapore subsidiary of Wirecard, Wirecard Singapore Pte. Ltd., the audit certificate for the accuracy of the 2017 annual balance sheet. This is shown by documents in the register of the Singapore financial supervisory authority Acra. 2017 is the last audited year of the Wirecard subsidiary in the Asian city-state.

Ernst & Young cannot determine the adequacy, completeness, and accuracy of the financial statements of Wirecard AG’s subsidiary in Singapore, German Handelsblatt reported Tuesday citing a statement from the firm. Consequently, the shares of the Dax company came under heavy pressure after. On Wednesday, the share was trading around 5.7 percent lower at the start of trading in Frankfurt.

Wirecard Singapore Pte. Ltd. is not an insignificant subsidiary of the WireCard group, to say the least. On the contrary. As the financial statements show, in 2017 it generated sales of just under 40 million dollars, after just under 57 million dollars in the previous year. More important, however, is the significance of the overall group. Singapore is the central location from which WireCard organizes its expansion in Asia. It is exactly this Singapore subsidiary that is under investigation by the Financial Times reporters.

The Ernst & Young Issue

At this point, the problem of WireCard also becomes a problem for the accountant Ernst & Young (EY). The question arises as to why EY confirmed the parent company’s 2017 balance sheets without restriction. The balance sheets of the subsidiary in Singapore will, of course, be consolidated in the balance sheets of the parent company WireCard in Germany. In EY’s audit opinion for the parent company, the substantial problems of the Singapore subsidiary also discovered by EY should be mentioned.

If the problems of the important subsidiary in Singapore through which the entire Asian business of WireCard is organized are so substantiated that the Singapore subsidiary is refused confirmation, then this should be mentioned in the parent’s audit opinion. Also because EY determines that apparently no usable accounting data is available from the Singapore subsidiary.

In the interests of shareholders and regulators, EY should have noted this in the audit opinion. This was also confirmed by the auditor Elfriede Sixt, former EY partner and specialist in international accounting and money laundering, who we interviewed.

It is very unusual that the apparently substantial problems in Singapore are not mentioned by EY. Although I don’t know any details and can therefore not give a final analysis, in case of doubt such findings should be made in the interest of investors, especially in the case of listed companies. The provisions relating to KYC and AML regulations in themselves already impose an extensive documentation obligation for banks and financial services providers. Missing documents are also a problem from this point of view and must be mentioned from my point of view. In the interest of shareholders and supervisory authorities.

Elfriede Sixt, Auditor and Certified Public Accountant (CPA) and EFRI principal

The Ireland & GreyMountain Question

FT’s allegations also include WireCard in Ireland. There, WireCard allegedly tried to inflate sales. In fact, we know from our FinTelegram reports that between at least 2014 and 2017 WireCard entered into massive cooperation with GreyMountain Management Ltd (GMM) of Israeli David Cartu and his partner Uri Katz. GMM, in turn, was the operator of numerous fraudulent binary option scams.

WireCard and GreyMountain Management in Ireland
WireCard and GreyMountain Management in Ireland

The payments of the fraudulent customers were apparently made via WireCard and inflated their sales accordingly. GMM was based in WireCard’s office building. In addition, there were very close personal and family ties between WireCard Ireland and GMM. At this point, the question arises of WireCard’s actual involvement in the gigantic binary options fraud between 2012 and 2018, which has been raised several times but never answered. Currently, numerous companies and individuals are being charged and convicted in the USA and Europe (e.g. Yukom Communications Ltd.).

The KPMG audit

Wirecard has hired KPMG to conduct an independent audit to address allegations by the Financial Times that its finance team had sought to inflate reported sales and profits, it said on Monday. “This is an active strategic step. The allegations are old, we have investigated them and found them to be completely baseless,” CEO Markus Braun told Reuters on Monday.

KMPG has to deliver quite a lot of answers to turn around the messy situation Wirecard is in right now. That’s for sure.

So far the reporters of the Financial Times have been right with their reports. This is confirmed by the information now coming to light from 2017. It will remain exciting about WireCard and Ernst & Young.

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