- by Alexander Hübner and Tom Sims

Munich (Reuters) - Wirecard insolvency administrator Michael Jaffe is demanding 1.5 billion euros from EY, the payment processor's long-standing auditor.

A spokesman for the Stuttgart Regional Court confirmed on Friday the amount in dispute in the action for damages that 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 escrow 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 want to comment on the amount.

According to the status report, the insolvency administrator has also sued the US investment bank Citi for 140 million euros before the Munich Regional Court. Just a few months before the insolvency, Citi 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 that Ley received from Wirecard in 2020, even though 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 falsification, market manipulation, fraud and breach of trust during his time as CFO (from 2006 to 2017) and later as a consultant.

In his report, Jaffe also rejects the latest theories put forward by 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.

(Report by Alexander Hübner and Tom Sims, edited by Olaf Brenner. If you have any queries, please contact our editorial team at berlin.newsroom@thomsonreuters.com (for politics and the economy) or frankfurt.newsroom@thomsonreuters.com (for companies and markets).)