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Short-sellers have raked in more than $1.2 billion on Wirecard this week after the company's dramatic share price plunge

Hedge funds have made profits of over $1 billion betting against Wirecard in the last week, the Financial Times reported.

FILE PHOTO: The headquarters of Wirecard AG, an independent provider of outsourcing and white label solutions for electronic payment transactions is seen in Aschheim near Munich, Germany April 25, 2019. REUTERS/Michael Dalder
  • Wirecard filed for insolvency on Thursday after tumultuous week which saw its former CEO Markus Braun resign and be arrested.
  • Shares of the company have fallen 98% in 2020, as the company battles a multi-billion dollar accounting scandal.
  • London-based TCI Fund Management is said to have made $217 million in the last week betting against Wirecard.
  • Visit Business Insider's homepage for more stories .
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Hedge funds have made more than $1 billion of profits in the past week as a result of betting against the scandal-ridden fintech firm Wirecard following a tumultuous week in which it filed for insolvency and its former CEO was arrested.

Among the winners were two of the UK's best-known hedge funds, Chris Hohn's TCI Fund Management and Paul Marshall's Marshall Wace, the Financial Times reported.

The German payments processor filed for insolvency on Thursday following days of turmoil and dramatic events including the arrest of its former chief executive Markus Braun on suspicion of market manipulation and false accounting practises.

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Wirecard's share price has been in the red since last week when its auditor EY said it could not trace 1.9 billion (about $2 billion) on its balance sheet. It has lost around 97% of its market capitalization since the start of 2020.

The company said on Monday the money likely never existed.

Read more: A high-growth fund manager is tripling her peers' returns in 2020 while targeting nontech industries like beer and restaurants. She breaks down how she picked out 5 of the most innovative companies. The firm had said its missing cash was being held in two banks in the Philippines, but later the central bank of the Philippines denied the claim . Since allegations of an possible accounting fraud have erupted, short sellers have been piling into Wirecard's stock. Last year, Germany's market regulator, BaFin prohibited such bets on the company and imposed a two-month long ban, but elsewhere Read more: Aram Green has crushed 99% of his stock-picking peers over the last 5 years. He details his approach for finding hidden gems and shares 6 underappreciated stocks poised to dominate in the future. TCI increased its bet against the firm from 1.04% of shares to 1.53% in the past week, and generated 193 million euros ($217 million), data group Breakout point said. Carson Block, who founded short-selling firm Muddy Waters told the FT: "Insolvency is the predictable outcome of fraud with debt." He said he does not hold any short position in Wirecard, due to lack of availability on any stock to borrow. David Greenspan of New York-based Slate Path Capital increased its negative bet to 1.75% of the company in the same time period, and has raked in about 220 million euros ($247 million). Short-sellers have made $1.23 billion of gains on Wirecard Breakout Point said that the top eight short-sellers made a minimum of 1.1 billion euros ($1.23 billion). IHS Markit said that Wirecard has become one of the most expensive stocks in Europe to borrow. Marshall Wace first made a bet against the German payments processing firm over two years ago. The FT reported, citing an anonymous source, that the firm is said to have made about 150 million euros ($168 million). New York-based hedge fund Coatue Management also is said to have held a big short bet. BaFin has come under scrutiny by shortsellers because of its handling of the Wirecard crisis. It banned short-selling against Wirecard two years ago, citing the need to protect Wirecard from collapse. The German Regulator acknowledged this week in a panel discussion that the scandal was a "complete disaster." "It's a shame that something like that happened." It also filed a criminal complaint against 10 short sellers and two FT journalists last year accusing them of potential market manipulation. Block told the FT: "When the regulator is as incompetent and craven a regulator as BaFin, the German market becomes a paradise for financial criminals." NOW WATCH: What makes 'Parasite' so shocking is the twist that happens in a 10-minute sequence See Also: MORGAN STANLEY: The best-performing stocks for the end of recessions are loaded for surprising gains in the second half of the year. Here's what to buy now so your portfolio is ready. Top strategists from Morgan Stanley and Schwab lay out how to trade an upside-down market A 30-year market veteran explains why we're in 'one of the nutsiest bubbles in the history of bubbledom' and warns of an 'underwater' economy for the next several years

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