German authorities have arrested the former CEO of German digital payments company Wirecard—which operates crypto debit cards—on suspicion of market manipulation and false accounting, according to the Financial Times.
Dr. Markus Braun is accused of lying to auditors about a €1.9 billion ($2.1 billion) hole in its finances. Wirecard said yesterday that the money probably does “not exist” and said that it had misled investors about how it made its profits.
Dr. Braun, who left the company on Friday, turned himself in on Monday evening, reported the FT. A judge in Munich will decide later today whether Dr. Braun must remain in custody.
Shares in Wirecard have dropped from €104 ($117) on June 17 to €16 ($18) today, down 85%.
Wirecard oversees major crypto debit cards
Wirecard operates crypto debit cards of Crypto.com and TenX. But both companies have said that user funds are not at risk.
Crypto.com CEO Kris Marzalek said, in a tweet on June 18, that the money of these cards are not held with Wirecard. “Wirecard does not have custody of any crypto held by Crypto.com,” he wrote, adding that the funds are held at another bank and regulated by the UK’s financial conduct authority.
Facts: debit cards issued by Wirecard for https://t.co/pFc4PzqqHR are fully prefunded. These client fiat funds are held by an EMI institution regulated by UK FCA in segregated client accounts. The funds are held at another bank (not Wirecard) as required by the FCA. (1/2)
— Kris | Crypto.com (@Kris_HK) June 18, 2020
TenX said much the same. In a tweet on June 19, it wrote: “As of now, this issue has no impact on our operation. Also, customer’s crypto and fiat balances are maintained by TenX and not by Wirecard.”
“We are [a] company completely functioning on our own, and also our licences.
Wirecard is our partner for issuing our cards. As of now, we don’t expect any issues in that regard,” it added.
Hi! No, we are company completely functioning on our own, and also our licences.
Wirecard is our partner for issuing our cards. As of now, we don't expect any issues in that regard.
— TenX (@tenxwallet) June 19, 2020
But it does show potential weaknesses with crypto companies relying on traditional banking rails. If only there was some alternative technology they could use.