After nine months of denials, delays, diversions and counterattacks, Wirecard’s CEO Marcus Braun finally admitted defeat on Friday.

He stepped down as CEO of the German fintech giant, saying “it cannot be ruled out that Wirecard has become the aggrieved party in a fraud of considerable proportions”. He’s to be replaced by the newly-hired head of compliance.

Wirecard has serious problems. Reporters from the Financial Times have been hounding it since October, alleging it exaggerates sales, profits, and cash balances.

Not long before the FT’s first report was published in October, Wirecard shares had been at an all-time high. The company at the time was worth €32 billion, which put it ahead of Deutsche Bank in the Dax 30 Index of the largest German companies. 

Since then the stock is down 85 per cent, or €27 billion in market cap.

The accounting behind the scandal is complicated. It involves escrow accounts, third parties, and subsidiaries on three continents. But an important part of the story is alleged to have taken place at an office in Foley Street, a block away from Connolly Station in Dublin. It involves an Irish subsidiary – one of whose directors was suspended from the company on Friday – and a small accounting firm based in Islandbridge.

From porn to payments

Wirecard is in the business of moving large amounts of money online. Having started out in 1999 as a payment processor for porn and gambling sites, it evolved into a global payments company. It connects online businesses into the financial system by helping them set up and manage payments. 

Wirecard is accused of two frauds: overstating its cash balances and overstating earnings. The former it allegedly did by claiming customers’ cash balances, over which it was custodian, as its own. The latter is the one allegedly involving its Irish operation.

Wirecard was able to grow very quickly over the last ten years by partnering up with smaller payments companies around the world. Partnerships with local payments companies let it quickly establish itself in new markets. 

One of these partnerships is at the centre of Wirecard’s financial problems. A Dubai-based partner called Al Alam Solutions contributed more than half of Wirecard’s profits in 2016, according to reporting by the FT. Some €350 million in payments passed through Al Alam each month during a period from 2016 to 2017.

But Al Alam’s earnings have proven hard to verify. Of its 34 supposed clients, none confirmed having done business with the company. 

The Al Alam funds didn’t flow directly to Wirecard’s Headquarters in Munich. Earnings passed through two subsidiary companies first: one in Dubai, and one in Foley Street in Dublin.

Wirecard again denied the allegations. But an KPMG investigation released in April found that the company did not provide enough information to fully explain the problems raised by the FT.

Wirecard UK & Ireland is staffed by about a dozen employees. It has three directors: Alan White and Helen Margaret Meehan, both with addresses in Dublin, and Jan Marsalek with an address in Munich.

Another director, Markus-Konrad Fuchs, stepped down from the board in January. And on Friday, Jan Marsalek was suspended from the parent company, where had been serving COO and a board member. 

Wirecard UK & Ireland doesn’t file annual accounts. It makes use of an exemption for the subsidiaries of foreign companies, provided the parent company guarantees all of their liabilities. 

Wirecard AG, of Germany, was audited by EY. But Wirecard UK & Ireland was not. Wirecard UK & Ireland was audited by BCK Audit Accounting and Tax, which is based in The Bridgewater Business Centre in Islandbridge. 

According to its December 2018 accounts, BCK employed 25 staff. Its directors are listed as Darren Connolly, Tony Kelly and Alison Gray. 

Tony Kelly was the managing partner of BCK Audit Accounting and Tax. He has also served on the board of Carmicheal and the Irish Auditing and Accounting Supervisory Authority.

Kelly co-founded BCK in 1998. 21 years later, on 1 October 2019, he and the other directors — Darren Connolly and Alison Gray — decided to close the business. There has been no allegation of wrongdoing against the firm.