Wirecard, a Fintech that issues many of the crypto-currency debit cards on the market, apparently declared economic insolvency.
As reported by the Wall Street Journal, Wirecard applied to the Munich district court to initiate the insolvency proceedings.
The company cited its „impending insolvency and high indebtedness“ as the reasons for the act, citing the $2.1 billion that disappeared from its funds.
A crypto-currency debit card issuer would have lost $2.1 billion in cash
Events occurred quickly for Wirecard since the discovery that 32% of its funds never existed. The company quickly became known when the founding CEO and other top executives resigned, the former being arrested later on Tuesday.
Insolvency, but not yet bankruptcy
Filing for insolvency means that the company cannot meet its short-term debt obligations due to negative cash flow or negative net asset balance. Given the scope of the incident, the latter appears to be the case.
According to its last financial report in 2018, the company had a net profit of about $350 million, although, due to recent history, investors may want to examine the numbers more closely.
Wirecard’s former CEO was arrested by police for a $2.1 billion fraud that threatened the company
During insolvency proceedings, companies usually take drastic measures to remain active, such as reducing staff and expenses, restructuring their debts, selling part of their assets and others.
Bankruptcy occurs when the company cannot pay its debt obligations in full. Although insolvency is a prerequisite for this, it does not indicate a complete failure of the company.
As Cointelegraph mentioned earlier, Wirecard is the issuer of many crypto debit cards, including Crypto.com, Cryptopay, some Wirex and TenX cards.