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In order to obtain a €900 million investment from SoftBank, which was seen as a vote of confidence in the German payments company after concerns were raised about its operations in 2019, Wirecard falsified client data and lied about internal records.
Details of the fraud, which are at the heart of the criminal case brought by Munich prosecutors against former CEO Markus Braun, reveal the lengths to which Wirecard went in order to win the Japanese investment conglomerate's business.
In the year leading up to Wirecard's demise in June 2020, when it acknowledged that half of its revenues and €1.9 billion in corporate cash did not exist, SoftBank's assistance also enabled Braun to raise an additional €500 million in debt.
Following the announcement of the SoftBank investment in Wirecard convertible bonds in April 2019, a €500 million bond was sold to other investors. The money assisted in sustaining Wirecard's cash-burning operations.
Several articles from April and May 2019 that detailed Wirecard's reliance on mysterious Asian business partners alarmed SoftBank during the deal's due diligence.
It was reported that three outsourcing partners in Manila, Singapore, and Dubai accounted for half of its revenue and nearly all of its operating profit, citing a Wirecard spreadsheet.
Chief Executive Braun at the time brushed off the report as "simply not true."
According to people with knowledge of the situation, SoftBank insisted on seeing a list of Wirecard's most significant clients who were processed by these outsourcing partners.
The sources claimed that Braun initially rejected the request on the grounds that it involved private business information. Braun and Akshay Naheta, a senior executive at the tech investor at the time, came to an understanding whereby SoftBank representatives could view client data on a computer at Wirecard's headquarters in Munich.
According to people familiar with the situation, Wirecard's second-in-command Jan Marsalek and a colleague created a list using actual client information from Wirecard operations in Europe because the three outsourcing partners lacked any actual clients.
The fake client list was displayed to SoftBank representatives on a computer screen in Munich in late July 2019, the people said.
The deception, which was previously unreported, took place in the final months before Wirecard's demise during a special audit by KPMG and came before a much larger attempt to falsify transaction data by Marsalek and others.
Braun and two other former company managers are expected to go on trial later this year on fraud, breach of trust, and market manipulation charges.
Braun claims he was a victim of the fraud as well but denies any wrongdoing.
In an isolated incident during the KPMG audit, Wirecard's head of accounting Stephan von Erffa admitted to forging documents despite being charged with fraud and denying wrongdoing.
According to people familiar with the situation, Munich prosecutors have demonstrated that Wirecard intentionally provided SoftBank with false information. The Japanese investor demanded and received a written guarantee from Wirecard that the spreadsheets regarding the outsourced operations cited by the FT did not exist during the due diligence process.
The spreadsheets were real and had been updated by Wirecard's accounting team for more than three years, according to several employees who later testified.
According to people familiar with the situation, von Erffa reportedly told Munich prosecutors that Braun knew the spreadsheets were real.
The FT's account of the events, according to a spokesperson for Braun, is "untrue" and "rebuffed by [Braun's] defense," and it reflects a "inaccurate understanding" of the fraud because the outsourcing partners were real and money was embezzled without Braun's knowledge, the spokesperson said.
SoftBank opted not to respond. By fLEXI tEAM