Recently, numerous investor groups have filed securities litigation against Wirecard AG (“Wirecard” or the “Company”) in Germany. Wirecard is a leading payment services company founded in Germany back in 1999. The Company provides electronic payment and risk management services, plus solutions focused on mobile payments, e-commerce, digitization, and financial technologies. Wirecard shares are listed on the Frankfurt Stock Exchange and, since 24 September 2018, Wirecard shares have been included in the DAX 30 index, which includes the 30 largest blue-chip German companies.
The allegations date back to 2018 and involve the potential of invented customers and falsified revenue. The initial downslide of Wirecard occurred after a story by the Financial Times on January 30, 2019, which references an internal presentation of Wirecard describing suspicious (and likely fraudulent) money flows at the Company’s Singapore branch. A subsequent FT article in February 2019 alleged Wirecard generated Asia-Pac sales revenues using sham transactions in order to meet profit targets. During this entire period, Wirecard not only denied all allegations but also initiated its own litigation to silence the critics.
On June 18, 2020, Wirecard delayed the release of its 2019 annual report for the third time, as its auditor Ernst & Young, was unable to confirm €1.9 billion in its balance sheet (approximately one-fourth of its consolidated total assets).
The €1.9 billion was believed to have been held by two banks in the Philippines, however the country’s central bank confirmed to authorities that the money had not entered its financial system. Soon thereafter, former CEO Markus Braun was detained on allegations of falsely inflating the Company’s balance sheet and revenues to make the Company appear more attractive to its customers and investors.
Wirecard’s auditor, Ernst & Young, is a named defendant as well. In an effort to defend itself against these allegations, Ernst & Young stated there were “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.” And to further defend its reputation, Ernst & Young elaborated that “even the most robust and extended audit procedures” could not discover what the auditor called a “collusive fraud.”
Currently, there are five class actions against Wirecard in Germany (see table below). ISS Securities Class Action Services continues to monitor each of these important cases – and will continue to update its clients as events develop throughout the life cycle of each action.
|Law Firm||Litigation Funder||Registration Deadline*|
|TILP Litigation Rechtsanwaltsgesellschaft mbH||DRRT and Therium Capital Mgmt||July 31, 2020|
|Quinn Emanuel Urquhart & Sullivan||Burford Capital||September 1, 2020|
|Robbins Geller Rudman & Dowd||N/A – Self Funded Action||July 31, 2020|
|Rotter Rechtsanwalte||TBD||December 31, 2020|
|Spaeth & Partner / Schirp & Partner||TBD||July 30, 2020|
By: Jeff Lubitz, Executive Director, and Grace Meyer, Senior Associate, ISS Securities Class Action Services