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Wirecard Shares Fall On Spurious Balance Confirmations

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Wirecard AG (WRCDF.PK) announced the auditor Ernst & Young has informed the company that no sufficient audit evidence could be obtained of cash balances on trust accounts to be consolidated in the consolidated financial statements in the amount of 1.9 billion euros. This equates to approximately a quarter of the consolidated balance sheet total. As a result, the company's 2019 consolidated financial statements will not be concluded as planned by June 18, 2020. If the financial statements cannot be made available until June 19, 2020, loans made to Wirecard amounting to approximately 2 billion euros can be terminated.

The company said there are indications that spurious balance confirmations had been provided from the side of the trustee respectively of the trustee's account holding banks to the auditor in order to deceive the auditor. The two banks that have been managing the escrow accounts since 2019 informed that the account numbers in question could not be assigned. The banks managing the escrow accounts are two Asian banks. Wirecard AG said the respective subsidiaries have paid substantial security deposits totaling 1.9 billion euros into these escrow accounts in order to guarantee risk management for participating merchants.

"It is currently unclear whether fraudulent transactions to the detriment of Wirecard AG have occurred. Wirecard AG will file a complaint against unknown persons," said Markus Braun, CEO Wirecard.

Shares of the company were down more than 50 percent, following the announcement.

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