Wirecard's former CEO has been detained by Munich prosecutors after €1.9bn went missing from the digital payment company in a scandal which has rattled Germany's financial industry.
Markus Braun, who resigned last week, turned himself in on Monday evening in Munich as part of a probe into the company's accounting practices, prosecutors said in a statement. He was granted bail of €5m at a hearing yesterday.
The company is fighting for survival after acknowledging the missing funds probably don't exist. The payment processor said it is in discussions with creditors and is considering a full-scale restructuring after pulling its financial results for fiscal 2019 and the first quarter of 2020.
"It's a brutal development, it could hardly have turned out worse," said Oliver Kipper, a defence lawyer who isn't involved in the case, before Braun's arrest.
"You should know what happened to €1.9bn of assets you have listed in your books."
In less than a week, the fintech once hyped as the future of German finance has lost most of its market value.
"It's a complete disaster we're looking at," said Felix Hufeld, head of BaFin, Germany's top financial regulator. "It's a shame that something like that happened."
Munich prosecutors said Braun is suspected of inflating Wirecard's balance sheet and sales volume by faking income from transactions with so-called third-party acquirers, possibly in co-operation with other perpetrators.
That would make the company appear financially strong and more attractive for investors and customers.
Braun can be released once he posts the bail and must report to a police station once a week. Prosecutors said they are likely to add additional suspects to the probe.
Braun's arrest will come as a further shock to Wirecard employees. Interim CEO James Freis told employees to expect a major restructuring as it tries to salvage the company, people familiar with the situation said.
In his first message to the company as interim chief, Freis said in a pre-recorded video that management is looking at all options, including selling assets.
Wirecard is working with investment bank Houlihan Lokey on a financing strategy, while also considering a broad restructuring to keep its business operations going.
Wirecard had been championed by German politicians as their own tech giant. It became a favourite of investors, breaking into Germany's elite Dax index of the largest companies in 2018, at the expense of the then 148-year-old Commerzbank.