Investigations into German payments company Wirecard AG intensified as police in Singapore raided local offices, while Munich prosecutors started a probe into possible market manipulation over reports that caused the shares to tank.
The company has denied reports by the Financial Times alleging accounting fraud for more than a week. Singapore police on Friday searched the offices after saying earlier this week they would look into the allegations as German prosecutors opened their probe following a criminal complaint from Wirecard. The latest developments caused the shares to plunge as much as 22 percent in Frankfurt.
Chief Executive Officer Markus Braun on Monday said he expects an investigation by an outside law firm to resolve allegations of compliance breaches and validate conclusions already made by an internal probe. Munich authorities said the investigation in Germany is focused on unidentified individuals for market manipulation and that they currently see no evidence to investigate Wirecard employees over accounting fraud allegations.
A Wirecard employee in Singapore alleged in April that a member of the company’s finance team engaged in potential accounting breaches. “There were personal animosities between employees involved,” Braun said earlier this week. “We think the whole issue is not so much an accounting, compliance or whatever issue, but an issue between people. Such things happen, where there are human beings, there are sometimes emotions.”
The alleged breaches took place between 2015 and 2018 and relate to revenue totaling 6.9 million euros ($7.8 million), costs of 4.1 million euros and intellectual property valued at 2.6 million euros, according to the company. That compares with revenue last year of 2.1 billion euros.
“Accounting irregularities have to be ‘material’ to constitute a crime under German law,” said Eva Racky, a defense lawyer based in Frankfurt. “So if the amount is too small compared with the overall balance sheet to meet the threshold, prosecutors won’t investigate.”
Wirecard plunged as much as 24.45 euros and traded 19 percent lower of 3:24 p.m. in Frankfurt. Since the FT’s first report on the allegations last week, the shares have tumbled 47 percent, slashing the company’s market value by about 9.7 billion euros.
Wirecard reiterated on Friday that it’s working with the authorities in both countries. In Singapore, the company said it met with law enforcement officials and “provided the police with comprehensive supporting material in regards to their inquiry.”
Wirecard has pledged it will publish the findings of law firm Rajah & Tann’s probe into the matter in the near future. The company’s internal compliance department determined that the allegations were “unfounded. Full stop,” Braun said Monday.
This is not the first time that the company has had to defend its reputation. The shares also plummeted after past claims were published about accounting irregularities in 2008 and fraud allegations in 2016.