CEO of Softbank Group Masayoshi Son attending a information convention in Tokyo on February 8, 2017.Alessandro Di Ciommo | NurPhoto | Getty ImagesSoftBank has come beneath renewed scrutiny about its funding technique — however this time it is about one of many Japanese tech conglomerate’s lesser-known bets.Final yr, the corporate made a 900 million euros ($1 billion) funding in Wirecard, as a part of a broader tie-up between the 2 on digital funds. However that deal has raised eyebrows now as a result of a deepening accounting disaster on the German funds processor.SoftBank has come beneath renewed scrutiny about its funding technique — and this time it considerations one of many Japanese tech conglomerate’s lesser-known bets.Final yr, the corporate made a 900 million euro ($1 billion) funding in Wirecard, as a part of a broader tie-up between the 2 on digital funds. However that deal has raised eyebrows now as a result of a deepening accounting disaster on the German funds processor.The Munich-based firm is preventing for its survival after revealing that 1.9 billion euros of lacking cash — roughly 1 / 4 of its steadiness sheet — possible does not exist. Auditors at EY refused to log out the agency’s 2019 accounts final week as a result of they could not find the funds.The scandal has battered the tech agency’s shares, which have fallen greater than 80% since final Wednesday’s market shut. And this has led to contemporary doubts over SoftBank’s strategies, though the Japanese agency says it took care to hedge in opposition to potential losses.Complicated transactionWirecard and SoftBank introduced the funding and partnership between the 2 companies in April 2019. The 2 structured a 900 million euros convertible word issuance from Wirecard — convertible notes being a sort of debt that may be repaid in stock relatively than cash.The notes, which have a five-year maturity, would convert right into a 6% stake in Wirecard. Analysts say the deal was structured in such a method that there was no monetary danger to SoftBank.Markus Braun, chief government officer of Wirecard AG, arrives for the corporate’s annual information convention within the Aschheim district of Munich, Germany, on Tuesday, April 25, 2019.Michaela Handrek-Rehle | Bloomberg by way of Getty ImagesAt the time, there had already been considerations about Wirecard’s accounting practices. The Monetary Instances ran a collection of studies detailing suspicious transactions and cast contracts used to artificially inflate Wirecard’s steadiness sheet. However at that stage, these had been allegations that Wirecard disputed and even threatened authorized motion over.So far as SoftBank was involved, Wirecard’s financials had been in good well being. The enterprise was rising and the agency had lately changed Commerzbank in Germany’s blue-chip DAX index.The transaction was managed by SoftBank Funding Advisors, the SoftBank subsidiary accountable for its big $100 billion Imaginative and prescient Fund, and Credit score Suisse was employed to behave as advisor.Credit score Suisse was not instantly accessible for remark when contacted by CNBC.The deal was given shareholder approval in June, whereas Wirecard secured an investment-grade credit standing from Moody’s in August. Moody’s has since downgraded the corporate’s ranking to junk.In September, SoftBank did one other deal, this time seeking to hedge in opposition to its authentic wager. The corporate primarily repackaged the convertible bonds into exchangeables, that are additionally repaid in stock.Credit score Suisse helped SoftBank promote the debt to a gaggle of institutional traders to e book early earnings and defend its principal funding. This technique, reported by different shops together with the FT, was confirmed to CNBC by SoftBank.Neil Campling, a tech, media and telecom analyst at Mirabaud Securities, instructed CNBC the transaction “was structured in such a method that SoftBank took no monetary danger in anyway.”KPMG auditThen in October, the FT launched a brand new report claiming that Wirecard staff appeared to conspire to fraudulently inflate gross sales and earnings. That very same month, Wirecard had introduced in KPMG to run an impartial audit of the corporate’s accounts.The findings of that audit didn’t work in Wirecard’s favor. KPMG stated it was unable to conclude whether or not revenues booked from three accomplice processing corporations — which had been highlighted within the FT’s reporting — existed or not for the years 2016, 2017 and 2018.Wirecard has stated it will not be commenting additional on the matter.For its half, SoftBank says it was counting on the identical knowledge utilized by Germany’s BaFin monetary regulator, lenders, shareholders and rankings companies.”Allegations that continued to encompass the corporate after the discharge of the 2018 audited financials, and our funding, led us to push for the impartial audit that helped to uncover the obvious fraud, which had gone undetected for years,” a SoftBank Funding Advisers spokesperson instructed CNBC by electronic mail Tuesday.And SoftBank seems to have lower its publicity to Wirecard. Based on studies, the $1 billion financing got here out of SoftBank executives’ pockets in addition to Abu Dhabi’s Mubadala sovereign wealth fund, however not SoftBank’s steadiness sheet. SoftBank declined to touch upon the restricted companions — in different phrases, the traders who put within the cash — when questioned by CNBC. Mubadala was not instantly accessible to touch upon the deal.Wirecard shares have collapsed and there are some analysts who assume the corporate’s stock price may be nugatory.The plunge within the firm’s value is bound to weigh on the unique bond issuance. Nonetheless, any losses incurred would in principle affect SoftBank’s companions relatively than the group itself, based on studies. Nonetheless, it highlights one other big-ticket deal from the Japanese tech funding juggernaut that’s now going through questions over due diligence. SoftBank’s infamous multi-billion funding in workplace rental agency WeWork — which noticed its non-public valuation slashed from $47 billion to simply $2.9 billion in a yr — has clouded the corporate’s picture.”I believe so far as Softbank’s funding portfolio is anxious, we might hear now that, in actuality, the investments in Wirecard, in WeWork, in Oyo the inns enterprise, all of these have had completely different points, however all have points,” stated Campling.”What that tells you is that maybe the Imaginative and prescient Fund requires new imaginative and prescient in its funding technique. As a result of should you have a look at the quotes traditionally from the Softbank CEO, he wants to vary as a result of his imaginative and prescient has been considerably clouded via a plethora of errors in current time.”SoftBank CEO Masayoshi Son has beforehand quoted Yoda and stated he has made some investments utilizing his sense of “odor.” Extra lately, he in contrast himself to a misunderstood Jesus Christ whereas defending his funding technique.