Former Wirecard shareholders are suing audit firm EY Germany, accusing it of internal reorganisation and potentially asset stripping it to prevent payouts and compensation in connection with the collapse of the tech payments company.
The company's collapse in 2020 shook Germany where it had long been the darling of the country's fintech scene. It filed for insolvency in that year after reporting €1.9 billion ($2 billion) that had been on its balance sheet could not be found.
The fraud cost banks €3.1 billion in loans and write-downs; EY Germany was the company's auditor.
Wirecard shareholders now fear the internal reorganisation of EY Germany could mean the firm is removing financial assets from the service that could potentially be held accountable for the damage they suffered.
Claims that group reorganised to keep profitable parts separate
According to the Financial Times, the changes within the group involved removing the company's highly profitable consulting, tax and M&A advisory operations - which account for three-quarters of the company's annual €2.6 billion revenue - and putting them into separate legal entities away from the auditing business.
"The legal entity that is subject to the Wirecard lawsuits is stripped of significant assets, which otherwise could have been used to cover damage claims," Joachim Lehnhardt told the FT. Lawyer Lehnhardt works for Quinn Emanuel Urquhart & Sullivan, the firm representing a a number of large institutional shareholders who are suing EY Germany.
The legal entity that is subject to the lawsuits, and currently generates €714 million in annual revenue, could even "be turned into an empty shell with no operative business and no assets", added Lehnhardt.
The allegations that much of Wirecard's revenue and assets were faked brought about a long line of court cases, many of them against EY, one of the world's biggest accountancy firms, known as the Big Four, (KPMG, Deloitte, EY and PwC), who collectively audit the majority of the world's publicly traded companies.
Reuters reported earlier in December 2023 that the accountancy firm was facing a lawsuit, filed by Wirecard's insolvency manager Michael Jaffe, claiming €1.5 billion in damages over its role in auditing Wirecard's books.
Another investor suit filed just a week before claiming more than €700 million in damages.
EY had previously rejected claims against it for damages concerning this case, however, the audit company recently abandoned its plans to appeal against penalties imposed by German authorities to "bring a conclusion to these proceedings", the FT reported.
Russian espionage linked toWirecard
One of the central figures in the case, Wirecard's former chief operating officer (COO), Jan Marsalek, is reportedly "on the run". Many suspect he is in Russia following British reports that he has direct links to the Russian intelligence agency FSB. He was reported to have been used as an "asset" by Russian intelligence. .
The allegations against Marsalek recently surfaced in a police warrant for the arrest of a former Austrian police and intelligence official, Egisto Ott.
Ott, who is accused of handing over cellphone data of former high-ranking Austrian officials to Russian intelligence and others, was arrested on 29 March.
He is suspected of having provided sensitive information to Jan Marsalek, too.
Between 2017 and 2021, the Austrian warrant says, Ott collected sensitive information on people of interest to Russia: "for the purpose of transmission to Jan Marsalek and to unknown representatives of Russian authorities," by conducting numerous searches in national police databases and making requests to other European police officers, including in Italy and Britain.
Thomas Riegler, a historian and espionage expert affiliated with the Austrian Center for Intelligence, Propaganda and Security Studies, said the case has "the potential for one of the biggest espionage stories in recent Austrian history".
Marsalek, 44, appeared to be "the spider in the web" who is "pulling the strings", Riegler said.
Ott remains in custody awaiting a decision on whether he will be officially charged, a process that will likely take a while.
Austrian Chancellor Karl Nehammer has ordered a meeting of the National Security Council for Tuesday, saying the country needs to boost its security in order to thwart Russian infiltration.
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