Wirecard Ex-C.E.O. Arrested on New Charges of Defrauding Banks

The former chief executive of Wirecard was arrested Wednesday on new charges after prosecutors in Munich said they had uncovered evidence that the insolvent payments company had used false accounting to defraud creditors of $3.7 billion.

The accusations significantly increase the scale of the financial wreckage left by Wirecard, and will add to the pressure on German regulators and outside auditors who failed to uncover irregularities despite warning signs going back more than a decade.

Markus Braun, the former chief executive, and two other former Wirecard executives were arrested early Wednesday after prosecutors “significantly widened” their investigation of the company, Anne Leiding, a spokeswoman for the Munich State’s Attorneys Office, told reporters.

Mr. Braun, who has contested the charges, had been free on bail since an earlier arrest on suspicion of accounting fraud and market manipulation in June, soon after Wirecard admitted that 1.9 billion euros, or $2.1 billion, that it claimed to have on its balance sheet probably never existed. He and two others, a former chief financial officer and a former head of accounting who were identified only by their initials, remained in custody after being brought before a judge on Wednesday, Ms. Leiding said.

Authorities are also searching for Jan Marsalek, the former chief operating officer of Wirecard. The German newspaper Handelsblatt reported this week that he might be in Russia, where, it said, he was believed to have contacts in intelligence circles.

The new charges, including organized fraud and market manipulation, are based on evidence that Wirecard falsely inflated its sales and profits to secure loans worth €3.2 billion, or $3.7 billion, from banks in Germany, Japan and other countries, Ms. Leiding said.

“Because of Wirecard’s insolvency,” she said, the money has “very likely been lost.” She did not identify the banks.

Shareholders of Wirecard, which was listed on Germany’s blue chip DAX index, have already lost most of their money. Shares in the company, which processed electronic payments and portrayed itself as a fast-growing technology firm, sold for more than €190 at their peak in 2018. On Wednesday, they were trading at €1.80.

People questioned in the case have described a conspiracy that operated according to “a strict hierarchy, marked by esprit de corps and oaths of loyalty to the chief executive as leader,” Ms. Leiding said. The three executives arrested and others in the conspiracy knew at least by 2015 that Wirecard was losing money, she said.

“We are also asking ourselves how such a system could be established,” Ms. Leiding said.

The case has been an embarrassment to the German government. Olaf Scholz, the finance minister, is scheduled to appear before a parliamentary committee next week to answer criticism that he failed to act on signs of irregularities at Wirecard that he was informed about as early as last year.

The European Securities and Markets Authority, which oversees the European Union financial system, said last week that it would scrutinize Germany’s banking and accounting regulators after Wirecard exposed possible shortcomings.

Shareholders are suing EY, formerly known as Ernst & Young, claiming the consulting firm did a bad job auditing Wirecard’s books. EY has said it was also a victim of the fraud.

Ms. Leiding of the prosecutor’s office on Wednesday called for other witnesses with inside information to come forward. The longer they wait, she said, the less likely they are to get credit for cooperating.