Wirecard AG has filed for insolvency after directors could not say that the company could continue as a going concern.
The German payments company has applied to begin insolvency proceedings in Munich “due to the threat of insolvency and over-indebtedness”, with similar application being mulled for its operating subsidiaries.
Loans of €1.3bn could be called in on June 30 and July 1 unless talks with lenders can produce a solution.
Management said they will continue to try and see if the company can be restructured by working with the administrators when they are appointed.
Wirecard shares tanked 70% on Thursday to below €4, having been above €100 last Wednesday and approaching €200 in 2018 when the company was valued at around €25bn.
Wirecard Bank is not part of the insolvency proceedings, with German regualtor BaFin having already appointed a special representative.
“In future, the release processes for all payments of the bank will be located exclusively within the bank and no longer at Group level.
“With this step, Wirecard AG wishes to protect the appropriate interests of all parties involved with the company, including creditors, customers and employees,” the company said in a statement on Thursday afternoon.
Last Thursday, auditors EY refused to sign off on the company’s accounts for the past year as they could not verify the existence of €1.9bn that Wirecard claimed was being held in trust accounts in Asia.
But the two Philippine banks that were supposed to have the cash said that Wirecard was not even a client, leading the Germany company to say there was a “prevailing likelihood” that the supposed bank balances “do not exist”.
Earlier this week the company’s former chief executive Markus Braun was arrested in Germany, having resigned on Friday, but was later released after paying his bail of €5mln on Tuesday.
Chief operating officer Jan Marsalek was suspended from the last week, on a revocable basis, until June 30.
Dutch shareholder group VEB is pursuing compensation from the auditors, saying: “EY has played a significant role in the whole Wirecard scandal, not only from its inability to detect the flaws in Wirecard’s escrow account in former years.”
Wirecard has provided the financial backbone for countless fintech companies including Monzo, Revolut, Loot, Curve, Funding Circle, Atom, Tandem and Pockit.