Singapore’s central bank ordered Wirecard AG WDI -1.25% to shut its local payment network and return customer funds, the latest step in the dismantling of the former fintech star that was sunk by an alleged multibillion-dollar fraud.
The Monetary Authority of Singapore told Wirecard to return funds to customers, after having previously instructed the group to segregate any money belonging to local merchants or holders of prepaid cards in separate bank accounts in Singapore. The monetary authority acted after Wirecard said it was unable to provide payment processing services to a significant number of merchants.
Wirecard provided payment software and equipment to merchants to process customer credit-card payments, as well as issued cards. The Singapore shutdown isn’t likely to cause major disruptions since it had a limited client base, many of whom have backup providers. Wirecard has until Oct 14 to return customer funds.
The German fintech collapsed into insolvency in June after admitting that more than $2 billion of cash it had reported on its balance sheet probably didn’t exist. It employed more than 6,000 people at the time.
Wirecard’s local Singapore business was relatively small, but the city-state was a major hub for third-party businesses that accounted for most of Wirecard’s reported group revenue and all of its reported profits in recent years.
That revenue is at the center of the fake $2 billion. It was supposed to be held in escrow accounts managed by a Singapore-based accountant acting as a trustee. The accountant has been charged by Singapore police with falsifying documents related to trustee accounts and is due in court again on Oct 1. He couldn’t be reached for comment.
Germany prosecutors have said Wirecard generated fictitious income to make its loss-making businesses appear profitable. The company’s former long-time Chief Executive Markus Braun is detained in Germany under investigation. He has denied wrongdoing.
One former executive, Jan Marsalek, Mr. Braun’s No. 2, has gone on the run and is subject to an international arrest warrant. His lawyer has previously declined to comment.
Wirecard’s insolvency administrator, Munich-based lawyer Michael Jaffé, concluded that all of Wirecard’s businesses made significant losses, excluding the third-party partners at the center of the fraud. He estimated the businesses suffered combined losses of about €750 million, equivalent to about $880 million, from the start of 2017 to the end of the first quarter in 2020, according to a report produced in August and seen by The Wall Street Journal.
The company continues to operate its remaining business while trying to sell them in pieces to repay creditors.
This week, the administrator said it had sold Wirecard Romania to a European payments rival, Portugal-based SIBS Group. Sales processes are well advanced for Wirecard businesses in North America, Indonesia and Vietnam, and the administrator has agreed to sales of units in Brazil and the U.K.
Wirecard owes banks and bond investors more than €3 billion, according to the administrator’s report. The debt is split between €1.6 billion in a credit facility owed to a group of banks and €1.4 billion over two bond issues, including a convertible bond sponsored by employees of SoftBank Group, the Japanese technology and investment group. It also owes smaller amounts to a small local German lender and has debt in the form of other guarantees.