“The future of digital financial technologies starts here.” Does it sound inspiring? Well, it used to. That phrase is taken from the website of Wirecard AG (WDI DE) — the German blue-chip that not long ago was on a fast track to becoming Germany’s most valuable company. Also, a pioneer for issuing some of the world’s first prepaid crypto cards. Today, that’s already history. A new chapter in the long book of accounting fraud. But the question remains: will the Wirecard accounting scandal weigh on booming crypto cards?
EY auditors found something uncommon when auditing the balance sheet of its decade-long client on June 18, 2020. Nearly €1.9 billion were missing. At least that’s what everyone thought. Suspicions escalated rapidly as Wirecard CEO Markus Braun handed in his resignation.
On June 22, the company came out with a shocking statement:
“There is a prevailing likelihood that the bank trust account balances in the amount of 1.9 billion euros do not exist,” Wirecard wrote in a press release.
That same day, market players witnessed the beginning of the end. Only hours after the document went live on their website, Mr. Braun was arrested in Munich on charges of inflating revenues through fraudulent accounting techniques.
Braun, who’s built Wirecard from scratch to being one of the country’s most respected enterprises, was quickly released on a whopping 5 million-euro bail.
The shares of Wirecard went on free-fall mode. It took three trading sessions to evaporate almost 90% of the DAX-listed company value, taking the shares from 103 euros to $3 euros.
On June 25, the payments giant filed for insolvency following unsuccessful efforts to cut a deal with lenders to stay afloat despite the missing quarter of its balance sheet.
“The management board of Wirecard AG has decided today to file an application for the opening of insolvency proceedings for Wirecard AG with the competent district court of Munich (Amtsgericht München) due to impending insolvency and over-indebtedness.”
The decision of seeking court protection is a desperate attempt from Wirecard’s board as the company stands ahead of a massive 800 million-euros worth of loans due on June 30 and another 500 million-euros loan expiring on July 1.
In Frankfurt, Wirecard stocks have already been suspended from trading.
The German payment processor has been among the first issuers of so-called Bitcoin debit cards. Not surprisingly, some well-known players in the space are using their services.
Crypto.com, Wirex, TenX, and CryptoPay are just a few names on a long list of crypto debit cards that rely on Wirecard’s payment infrastructure. In most cases, Wirecard provides prepaid VISA cards available for specific regions.
As you would expect, Wirecard isn’t the only card issuers willing to work with cryptocurrency companies. With the number of crypto payments increasing by more than 90% between 2017 and 2018, it’s only natural for other processors to jump on the game.
While the Wirecard scandal is unlikely to result in balance losses for cardholders of the aforementioned companies, the payment services could be temporarily or permanently interrupted. That’s exactly what happened with the collapse of WaveCrest back in 2018 when the processor lost its VISA membership and left thousands of cards totally worthless.
That said, this particular moment is an opportunity for crypto card solutions not affiliated to Wirecard to gain substantial market share. And yes, that includes TRASTRA.
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We all remember the time when digital currency, Bitcoin to be precise changed the world when it skyrocketed at the top of the charts, making some shrewd stock investors, overnight millionaires. This was not just a phase though and cryptocurrency has continued to take the world by storm. Even though it is a process that is still stabilizing, it is soon to become the most favored form of currency in more ways than one.
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