Wirecard insolvency administrator demands a lot of money from EY

Wirecard insolvency administrator Michael Jaffe is trying to extract as much money as possible for the insolvent company's creditors. He is demanding a sum in the billions from the auditors EY. But Citi Bank and former CFO Burkhard Ley are also expected to pay.

Wirecard insolvency administrator Michael Jaffe is demanding 1.5 billion euros from EY, the payment processor's long-standing auditor. A spokesman for Stuttgart Regional Court confirmed the amount in dispute in the action for damages, which Jaffe had filed shortly before Christmas.

Jaffe blames EY's auditors, who had audited the balance sheets since 2009, for the fact that the fraud at Wirecard was not uncovered earlier. He considers Wirecard's allegedly lucrative business with third-party partners in Asia to be fictitious. 1.9 billion euros in commissions, which according to Wirecard's balance sheet were supposed to be held in trust accounts in Asia, turned out to be non-existent in 2020. Wirecard then had to file for insolvency.

There is "much to suggest that there are claims for damages against the auditors (...) as they breached their duties in auditing the annual financial statements and should not have issued an unqualified audit opinion," Jaffe writes in the latest status report to Wirecard's creditors, which is available to Reuters. This is also evident from an expert opinion that he had commissioned from auditors.

EY did not agree to a settlement, which is why he had to file the lawsuit before the end of the year so that the claims would not become time-barred. A spokesperson for Jaffe did not wish to comment on the amount of the claim.

Lawsuit against Citi Bank

According to the status report, the insolvency administrator has also sued the US investment bank Citi for 140 million euros at the Munich Regional Court. Just a few months before the insolvency, it had carried out a share buyback of this volume for Wirecard.

However, Wirecard could no longer have afforded the buyback at that time, Jaffe argues in the lawsuit. This "constitutes a breach of stock corporation law regulations, which in turn leads to the nullity of the agreements concluded under the law of obligations", the report states. The bank has rejected the claims, which is why he has now filed a lawsuit to prevent the statute of limitations from running out.

The task of the insolvency administrator is to recover as much money as possible for the creditors. Following the bankruptcy, they have filed claims worth billions against the former stock market star. Former CFO Burkhard Ley is also expected to pay back money, according to the report. Jaffe is demanding 815,000 euros, which Ley still received from Wirecard in 2020, although his consultancy contract expired at the end of 2019.

The Munich public prosecutor's office brought charges against Ley in mid-December. Among other things, it accuses him of balance sheet fraud, market manipulation, fraud and breach of trust during his time as CFO (from 2006 to 2017) and later as a consultant.

Jaffe rejects Braun's theories

In his report, Jaffe also rejects the latest theories of former CEO Markus Braun regarding the third-party partner business in Asia. Braun's lawyer Alfred Dierlamm had argued in the trial surrounding Wirecard's bankruptcy that the fugitive CEO Jan Marsalek and the co-defendant in Dubai, Oliver Bellenhaus, had diverted the lucrative business with partners in Asia to other service providers and enriched themselves from it. Jaffe considers this to be absurd.

It is not plausible how the business could have been diverted "without leaving even a trace in the company". The data was evaluated very carefully in this respect. There was no evidence that Wirecard had ever referred merchants to third-party partners who had processed the payments on its behalf. Even employees questioned by the insolvency administration could not remember this.

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The Wirecard insolvency administrator's lawsuit against EY is not the only legal action. Jaffe has also filed a lawsuit against Citi Bank, seeking 140 million euros, as the bank conducted a share buyback of this volume for Wirecard just before its insolvency.

The Wirecard insolvency administrator's lawsuit against Citi Bank, like his demand from EY, stems from the company's financial distress. Jaffe argues that the bank breached stock corporation law regulations by carrying out the buyback when Wirecard could not afford it, rendering the agreements null and void.

Source: www.ntv.de