Troubled fintech crypto debit card issuer, Wirecard, has allegedly filed an open insolvency proceeding. According to the Wall Street Journal ‘s report of 25 June, the Munich-based crypto card firm applied to the Munich District Court to initiate the insolvency settlement process.
The global Fintech firm cited its imminent insolvency and excessive debt as the chief encouragement for the application, referring to the $2.1 billion missing from its balance sheet. Situations have rapidly changed for the crypto debit card issuer after finding out that 32 percent of its balance sheet did not really exist.
Please find the latest statement of the management board of Wirecard AG on current events here: https://t.co/yjoAam7Uai pic.twitter.com/2KYY0j9Dj2
— Wirecard (@wirecard) June 19, 2020
Crypto debit card Issuer not yet bankrupt
Immediately after the discovery, Fintech became a leaderless company as the CEO and other top officials quit their positions. Wirecard ‘s insolvency application suggests that the company can not meet its liabilities for a short period of time. Insolvency may be the result of either a cash-flow deficit or a negative net asset balance. In the case of Wirecard, this seems to be the latter.
“The Management Board has come to the conclusion that a positive; going concern forecast cannot be made in the short time available. Thus, the company’s ability to continue as a going concern is not assured,” stated Wirecard.
As per the most recent financial filings in 2018, the Crypto Debit Card Issuer has a net profit of $350 million. However, as per the latest developments, investors might want to do a careful study on the figures. During the insolvency process; firms will typically implement radical policies to keep treading waters; such as scaling down staff and expenses, reorganizing debt, selling a section of their assets, and other measures.
Bankruptcy vs. insolvency
Bankruptcy happens when a firm is completely incapable of meeting its debt obligations. Insolvency, on the other hand, is a precondition for bankruptcy. Insolvency does not suggest that the company has completely failed.
In conclusion, Wirecard ‘s business areas include the issuing of crypto payment cards to Cryptop.com and Tenx. According to a Tenx representative, client funds in fiat and digital currency have not been affected by the latest drama of the crypto debit card issuer.