The legal proceedings have been opened in Munich “due to impending insolvency and over-indebtedness,” Wirecard said, adding it was also evaluating whether insolvency applications would have to be filed for its subsidiaries. The company controls a bank in Munich as well as a card-issuing unit in the UK.

On Monday Wirecard revealed that €1.9 billion ($2.1 billion) of cash on its balance sheet had gone missing. It has further admitted that the cash (roughly a quarter of its assets) probably never existed in the first place.

Wirecard’s ex-CEO Markus Braun has been arrested on suspicion of having artificially inflated the company’s balance sheet and sales through fake transactions. Prosecutors said the chief executive wanted, in this way, to make the firm appear stronger and more attractive for investors and customers.

Braun, who led Wirecard for 18 years, stepped down last week after auditors Ernst & Young (EY) made an announcement on Thursday about the missing billions from the company’s accounts. The firm was scheduled to publish Wirecard’s 2019 annual report on Thursday but said it would not be able to, because it could not confirm the existence of €1.9 billion in cash balances on trust accounts.

Braun said that Wirecard had been the victim of fraud, pointing to irregularities at two unnamed banks. Wirecard had been claiming that the missing amount was held in a trust account in the Philippines.

However, the central bank of the Philippines said that none of the missing money ever entered its financial system and that Wirecard used the names of the country’s two biggest banks (BDO and BPI) to try to mislead eventual investigators. 

Braun has since been released on a five-million-euro bail bond and has to report to police once a week. 

Wirecard shares, which have lost 90 percent of their value in less than a week, were suspended on the Frankfurt stock exchange. The fintech company thus became the first sitting member of Germany’s blue-chip share index DAX to go out of business.

For more stories on economy & finance visit RT’s business section

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