(Adds Bundesbank declined to comment in paragraph 11)
By Arno Schuetze and Alexander Hübner
FRANKFURT, July 1 (Reuters) - Police and public prosecutors
raided Wirecard's WDIG.DE headquarters in Munich and four
properties in German and Austria on Wednesday as they widened
their investigation into the financial payments company that
collapsed last week.
Wirecard filed for insolvency last week owing creditors
almost $4 billion after disclosing a 1.9 billion euro ($2.1
billion) hole in its accounts that its auditor EY said was the
result of a sophisticated global fraud. The implosion of a financial technology company once seen as
one of the hottest prospects in Europe has led to political
finger-pointing in Germany and new investigations into potential
financial skullduggery from the Philippines to Mauritius.
German prosecutors said on Wednesday they were widening
their investigation to include suspected fraud, in addition to
market manipulation and falsifying of accounts.
They are also now investigating Wirecard's Chief Financial
Officer Alexander von Knoop and Chief Product Officer Susanne
Steidl, in addition to former Chief Executive Markus Braun and
operations boss Jan Marsalek.
None of the four could immediately be reached for comment.
Braun, who is Austrian, was arrested last week and released
on bail. Germany has issued an arrest warrant for Marsalek, who
was last believed to be in the Philippines. His lawyer declined
to comment. Von Knoop and Steidl were still working for
Wirecard, according to recent information from the company.
In parliament, the head of Germany's financial regulator
BaFin defended its record in the face of criticism that its
supervision of Wirecard was lax.
'ROUND-TRIPPING'
BaFin, which oversaw Wirecard's banking subsidiary, has
taken most of the flak for the scandal so far. Sources have told
Reuters that regulators discussed labelling Wirecard a financial
holding company in 2017 and 2019, which would have allowed BaFin
greater scrutiny, but took no action. BaFin President Felix Hufeld told lawmakers in a closed-door
session the decision not to change Wirecard's status was taken
with the Bundesbank and European Central Bank (ECB), according
to his spokeswoman, who stressed Hufeld did not blame the ECB.
The Bundesbank and the ECB both declined to comment.
The central bank and financial services regulator in
Mauritius said on Wednesday they had launched an investigation
into whether Wirecard was linked to "round-tripping" with an
entity registered in the offshore African financial centre.
Round-tripping is a kind of accounting fraud that entails
booking fake transactions with counterparties that appear to be
at arms length but are not, and is typically undertaken by
companies seeking to inflate reported revenues.
Wirecard's administrator Michael Jaffe, meanwhile, has
started scouting for potential buyers of the company's assets to
recoup some money for creditors. He said investors from around
the world had contacted him already.
Wirecard's U.S. subsidiary - which was Citi Prepaid Card
Services before Wirecard bought it in 2016 - has already been
put on the block. Investment banking boutique Moelis has been hired to find a
buyer for the U.S. business while Alvarez & Marsal is sounding
out interest in Wirecard's UK subsidiary, according to people
familiar with the matter.
Alvarez & Marsal declined to comment while Moelis was not
immediately available for comment.
"For any buyer, the most interesting aspect may be
Wirecard's customer list and the contracts for processing
payments for credit card firms," one investment banker said.
LOSING PATIENCE
Wirecard, which was founded in 1999, started out handling
payments for gambling and adult websites and now processes
payments for major global companies including Visa V.N and
Mastercard MA.N .
Jaffe has started marketing Wirecard's assets to rivals such
as Ingenico INGC.PA , Adyen ADYEN.AS , Worldline WLN.PA and
Nets, as well as to banks and private equity groups, though time
was of the essence, people familiar with the matter said.
"Key customers and employees are starting to turn their
backs on Wirecard, significantly reducing its value. If Visa and
Mastercard pull out it's game over," one of the people said.
While some of the operating assets were expected to find new
homes, the fate of Wirecard's bank - which has been ring-fenced
to prevent any outflow of cash - remains unclear.
"Wirecard Bank is still not insolvent. Payouts to merchants
and customers of Wirecard Bank are being executed without
restrictions," the administrator said.
While the administrator may recover some money from selling
Wirecard's assets, some creditors are losing patience.
British bank Lloyds LLOY.L sold a 120 million euro tranche
of Wirecard's revolving credit facility to 10 investors at about
17 cents on the euro, a person close to the matter said, adding
that others creditors were also trying to offload loans.
German asset manager Union Investment, which had big
investment in Wirecard, followed other investors in saying it
was considering legal action.
Wirecard bondholders are also discussing whether or not they
can take legal action against the banks that organised the sale
of the securities, according to a source close to the investors.