In the ongoing fallout from the Wirecard scandal, a new investor lawsuit is targeting Ernst & Young (EY), the company’s auditor, prior to its dramatic collapse in 2020, Reuters reports. This legal action, representing thousands of individual and institutional investors, is seeking damages totaling over €700 million. Former Wirecard CEO Markus Braun is currently standing trial in Munich, facing charges of accounting fraud, market manipulation, breach of trust, and gang fraud.
Background of the Wirecard Scandal
Central to the case is the allegation that the German fintech Wirecard’s 3rd party acquirer business in Asia, a major component of its operations, did not actually exist. This purported fraud led to a shortfall of €1.9 billion in Wirecard’s accounts at the time of its bankruptcy in June 2020.
The lawsuit, filed by the DSW shareholder protection group in a Munich court, spans 80,000 pages and represents the interests of 13,000 investors. This action is one of several lawsuits EY is facing regarding its auditing role in the Wirecard scandal. EY has previously denied responsibility for the damages related to Wirecard’s downfall.
Klaus Nieding, the lawyer representing the shareholders, criticized EY for its alleged oversight in the audit process. He contended that EY should have easily detected the absence of the purported €1.9 billion in Wirecard’s accounts, a discrepancy later quickly identified by KPMG.
Implications of Wirecard’s Downfall
Wirecard’s insolvency in June 2020, owing almost $4 billion to creditors, shocked the German business world and brought intense scrutiny to politicians, regulators, and other entities associated with the company. The revelation of the €1.9 billion gap in its accounts, described by EY as the result of sophisticated global fraud, has raised serious questions about audit practices and financial oversight.
