Second executive arrested in Wirecard scandal in Germany

(dpa via AP)

FRANKFURT, Germany  — Another executive with bankrupt payment company Wirecard has been arrested in Germany on suspicion of aggravated fraud, prosecutors said Monday. The suspect, the head of a company subsidiary in Dubai, had returned to Germany to face proceedings.

The arrest comes after former CEO Markus Braun was taken into custody on June 23 on charges of market manipulation and falsifying financial results and released on bail.

Wirecard, once a high-flying star of the burgeoning financial technology center, filed for protection from creditors through an insolvency proceeding on June 25 after executives admitted that 1.9 billion euros ($2.1 billion) that had been represented as being held in trust accounts in the Philippines in fact did not exist. The company said it is investigating the scope of its business handling payments through regional third parties, a major source of profits, and how that business was being conducted.

Prosecutors in the German city of Munich said in a statement that the suspect arrested Monday, who was not named in the news release, would be brought before a judge the same day. Bail and conditions of release are typically decided at such appearances.

The Wirecard debacle has let to questions about the effectiveness of German financial regulation and has been viewed as a setback for the investment climate and attempts to promote the country as a base for financial services companies.

German Finance Minister Olaf Scholz has announced plans to restructure financial services regulator BaFin, saying the entity must be given a broader mandate to check company finances. BaFin had directly overseen only Wirecard’s German banking arm, not the group as a whole.