- [Narrator] Wirecard, an online payment company
that was once the darling of Germany's fintech industry,
lost nearly $12 billion of market value
and filed for insolvency just days
after revealing a $2 billion hole in its balance sheet.
- What's happening at Wirecard looks like being
one of the worst financial disasters in Europe
since the financial crisis.
- I mean, you have to stretch back a long period of time
to have an implosion of this magnitude in Europe.
- [Narrator] The missing Wirecard money was supposed
to be held in two trust accounts.
The auditors investigating the company
said they couldn't find it.
- This $2 billion is essentially equivalent
to all the profits that Wirecard has made
in more than a decade.
- [Narrator] And everyone is wondering,
where did that money go?
- And nobody knows at the moment whether it exists,
whether it ever existed or not.
- [Narrator] Here's what we know.
Let's rewind and start with what Wirecard actually does.
- [Narrator] We're a global fintech company
with 20 years of payment experience.
- [Narrator] The German company provides software
and systems that link retailers, consumers,
and the financial system.
- So essentially what they do
is they collect payment details
from people who wanna buy stuff online
or even in stores.
They collect those details from their cards,
and then they perform the role of confirming,
settling, processing that whole transaction
when you buy anything online,
whether it be a holiday, some goods or services.
Their background, a lot of it was in gambling
and pornography, or adult entertainment.
- [Narrator] Over the years, the company began to bloom
as commerce shifted online and away from cash payments.
It attracted interest from giants like SoftBank
and Credit Suisse.
Their stock grew almost sixfold
between 2016 and 2018.
But some have questioned Wirecard's business model
and whether the company was actually worth
its market valuation.
- I think it was around October 2015
when I used to write a blog actually,
and one of the readers of the blog contacted me
and said, "Have you ever looked
"at this company called Wirecard?"
And then I haven't.
I had never heard of Wirecard to be honest.
- [Narrator] That's Matt Earl.
He's a short seller,
meaning he tries to make money
by betting that a certain company's share price will fall.
In 2016, Earl published
a report accusing Wirecard of malpractice.
- The main accusation was that they had probably
been instrumentally involved
in this processing illegal gamblings,
US facing illegal online gambling moneys.
- [Narrator] The company denied those allegations.
And Earl says he stopped short selling its stock
some years ago.
Starting early last year,
a new wave of "Financial Times" articles
on the company's global operations
led to Wirecard calling in KPMG for a special audit.
- This audit was supposed to demonstrate
that a bunch of the business
that people had said they doubted
was really real.
- [Narrator] But KPMG said it wasn't able
to determine the answer to some of those questions.
- And one of the biggest questions
was why there was a bunch of money
supposedly in some trustee accounts,
and whether that money was really there.
- [Narrator] When auditors went looking for the $2 billion
of cash that Wirecard had said was in two trust accounts
in the Philippines,
what they found was a gaping hole.
Electronic scans of documents confirming the accounts
had been sent to Ernst & Young, but-
- Its main auditor, Ernst & Young,
finally said that these documents weren't reliable
and that they thought they'd been deceived.
- [Narrator] The Wirecard story then began
to unravel quite rapidly.
CEO Markus Braun stepped down.
Wirecard said that the missing two billion
probably didn't exist, and then-
(speaking in foreign language)
- What he stands accused of is inflating the value
of the company through feigning business
with these third party acquirers.
- [Narrator] Braun has consistently denied wrongdoing,
and his lawyers didn't respond to a request for comment.
The partner companies in question
was supposed to process payments for Wirecard
in countries where it didn't have full licenses to operate.
But it couldn't be determined whether they generated
any revenue for the company at all.
In a matter of days, the company had filed
for insolvency proceeding, citing over-indebtedness.
Matt Earl, the short seller says
even if he's not making money
from Wirecard's latest woes,
he's glad that people are starting
to see the clearer picture.
- Obviously, the more pieces that you begin
to put into the puzzle, the clearer the picture becomes.
- [Narrator] But there's still a big question
over whether or not that $2 billion actually exists.
Wirecard executives have advanced two theories.
- One is that the numbers were completely made up.
The revenue was never there,
and that Wirecard was simply trying to inflate
the value of its business in order to make it shares
more attractive, in order to borrow more money.
And the other option
is that some of this business did exist,
but for whatever reason, it wasn't really being done
on behalf of Wirecard.
And the money was never put where it was supposed to be put.
And in fact, it has been in all or in part
taken by some other people somewhere.