German fintech Wirecard, has filed for insolvency after revealing over $2.9 billion in cash missing from its balance sheet didn't exist.
The company's former chief executive Markus Braun was arrested days after stepping down over allegations of inflating Wirecard's sales volume with fake income.
German prosecutors said he is also being investigated on suspicion of making the company look more attractive to investors.
Braun has been released on €5 million bail, and has denied any wrongdoing.
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The company's auditor, Ernst & Young GMBH, claims it was given false statements related to trust accounts while completing its 2019 audit.
"There are clear indications that this was an elaborate and sophisticated fraud, involving multiple parties around the world in different institutions, with a deliberate aim of deception," Ernst & Young said.
In an announcement to shareholders, Wirecard said there is a "prevailing likelihood" that the bank trust account balances, in the amount of €1.9 billion, do not exist.
"The company previously assumed that these trust accounts have been established for the benefit of the company in connection with the so called Third Party Acquiring business and has reported them as an asset in its financial accounts," Wirecard said.
"The foregoing also causes the company to question the previous assumptions regarding the reliability of the trustee relationships."
The board said it assessed previous descriptions of the so called Third Party Acquiring business by the company are not correct.
"The company continues to examine, whether, in which manner and to what extent such business has actually been conducted for the benefit of the company," it said.
"Wirecard continues to be in constructive discussions with its lending banks with regard to the continuation of credit lines and the further business relationship, including the continuation of the current drawing coming due at the end of June.
Wirecard said it is examining a broad range of possible further measures to ensure continuation of its business operations, including cost reductions as well as restructuring, disposal or termination of business units and products segments.
Wirecard is the first company on the German DAX 30 to ever file for bankruptcy.