EY was warned by its own whistleblower of Wirecard fraud four years before collapse

In May 2016 an EY employee wrote to EY Germany's Stuttgart headquarters alleging that Wirecard's senior management held stakes in Emerging Market Investment Fund 1A, the opaque Mauritius entity that sold Wirecard three Indian payments companies for EUR340 million; that the Indian units' operating profits were artificially inflated to boost profit-linked earn-outs; and that a Wirecard manager had offered an EY employee 'personal compensation' to sign off manipulated sales numbers. Wirecard collapsed in June 2020 in Germany's largest postwar fraud, with EUR1.9 billion missing.

EY's anti-fraud investigation, codenamed Project Ring, was terminated prematurely at the behest of Wirecard's second-in-command Jan Marsalek - now an Interpol fugitive - and KPMG's special-audit addendum found it 'suffered from governance shortcomings', was ended while incomplete, and left key questions unanswered. EY issued unqualified opinions on Wirecard's accounts until 2018, and its 2017 audit report described the forensic probe as 'concluded' with no evidence of flawed accounting - while EY's own fraud team told KPMG it was unfinished, terminated at Wirecard's request.

KPMG also found that Project Ring observations casting doubt on the Indian subsidiary's financial reporting were never properly scrutinised by the audit team that signed the 2017 accounts, and that the bribery allegation - which explicitly named EY - was handled internally when an independent third party should have been mandated. EY's global chairman Carmine Di Sibio wrote to clients expressing 'regret' that the fraud was 'not uncovered sooner', while claiming EY was 'ultimately successful in uncovering the fraud'.

The 2016 whistleblower letter was investigated by EY's own anti-fraud team even though the allegations named EY itself.

Project Ring was terminated at the client's behest before its observations were conclusively processed, and no final report was produced.

Doubts about the Indian subsidiaries' profits never reached the 2017 audit opinion in any substantive form.

The forensic probe was overseen by Wirecard's executive board rather than its supervisory board.

The bribery claim was attributed to 'cultural peculiarities' in India, and the implicated Wirecard manager was never formally interviewed.

When the auditor itself is named in an allegation, an internal probe is a conflict of interest: independent investigation and escalation are the only defensible route.

Germany's auditor oversight body Apas investigated EY, and Wirecard investors who lost billions pursued lawsuits against the firm. KPMG's unpublished info addendum, reported in September 2020, put the internal warnings on the record. Wirecard's Stephan von Erffa, the only manager named in the letter, was in police custody denying wrongdoing; Marsalek was on the run from German police.