Prosecutors In Germany Probing Wirecard For Possible Money Laundering

Prosecutors in Germany are investigating possible acts of money laundering by executives at Wirecard, the payment processing firm that filed for insolvency last month amid widespread accusations of fraud.

"We are investigating suspected money laundering," said a spokeswoman for the Munich prosecutor's office, without providing more details.

The scandal-scarred firm is already under investigation for fraud. The company’s former chief executive officer and largest shareholder, Markus Braun, was arrested but released after paying bail. Another unnamed executive based in Dubai was also arrested on fraud charges by authorities in Munich.

The company owes some $4 billion to creditors.

Long accused by investors of recording fake revenues, the company’s troubles boiled over last month when auditors were unable to account for some $2 billion on Wirecard’s financial statements.

The Wall Street Journal reported that in the U.S. authorities are now probing if Wirecard played a role in an alleged $100 million bank fraud conspiracy linked to an online marijuana marketplace. That case involved two businessmen who allegedly conspired with third-party payment processors and others to deceive U.S. banks into approving credit card payments for marijuana products. Wirecard may have served as both a payment processor and an offshore merchant bank in this alleged conspiracy.

The Irish Times reported that Wirecard’s offices in Dublin were raided by police at the request of German authorities in order to find evidence concerning alleged fraud.

The Journal also reported that as long ago as 2010, the Federal Bureau of Investigation probed a German citizen in Florida who operate an unlicensed money transmitting business that paid out illegal gambling profits from online casinos. Wirecard’s bank business was apparently involved in the transference of some of this cash.

In another incident in late 2015, German prosecutors raided Wirecard at the request of U.S. officials who were investigating money laundering activities.

Despite its deepening woes and apparent implosion, some investors are still keeping their Wirecard shares.

Wirecard stock price has plunged from $117.26 per share on June 17 to $2.80 per share as of Thursday’s close.

Last week Wirecard (now under the control of an administrator) said it will continue its business despite the insolvency. The company also said that “numerous interested parties worldwide have already expressed their interest in acquiring [its] business units.”

CNBC reported that some of the remaining shareholders are likely short-sellers hoping for further price declines.

Ortex Analytics, an equity analytics platform, revealed data that showed Coltrane Asset Management, Greenvale Capital, Capital Fund Management and Ennismore Fund Management either raised or opened new short positions in Wirecard last week.

“For anybody that thought the Wirecard saga was over, it’s clear that short-sellers are not done yet,” said Ortex Cofounder Peter Hillerberg.

Other investors who are hoping Wirecard somehow emerges from this implosion might be expecting too much.

Carola Rinker, an independent balance sheet expert who has examined Wirecard, told CNBC: “In case of an insolvency, the goodwill cannot be sold. Imagine you have a bottle of water and you shake it -- you cannot extract the bubbles out of the bottle, and that’s the problem of the goodwill. You can remove the cap from the bottle, however, and you can sell it.”