The Wirecard Fraud - How One Man Fooled all of Germany

Summary

This video explores the dramatic rise and fall of Wirecard, a German fintech company once hailed as a tech innovator. Wirecard grew rapidly in the 2000s, with its stock price surging and earning praise from investors and analysts. However, behind its success was a web of fraud, accounting manipulation, and deceit. The company’s downfall began when auditors revealed that $2 billion was missing from its accounts. The scandal resulted in the arrest of its CEO, a fleeing COO, and the eventual collapse of the company, raising questions about regulatory oversight and corporate governance.

Takeaways

• 📉 Wirecard was once a tech star in Germany but collapsed dramatically within days, losing 99% of its share price.
• 💡 The company was considered an innovative leader and was listed among Forbes' top 100 most innovative companies.
• 💰 Wirecard owed creditors $4 billion and filed for insolvency after admitting that $2 billion was missing from its accounts.
• 🚫 The scandal involved fraudulent financial reporting, accounting manipulation, and even hacking attacks on journalists.
• 🔍 CEO Markus Braun was arrested after Wirecard admitted that the missing money likely never existed.
• 🌍 Wirecard expanded globally, providing online payment services, and acquired businesses in banking and credit card issuance.
• ⚠️ In 2015, concerns about a €250 million gap in their balance sheet emerged, but Wirecard dismissed it as short-seller propaganda.
• 📊 An audit by KPMG in 2020 revealed that Wirecard’s profits from the previous years could not be verified.
• 🇵🇭 Investigations into supposed third-party accounts in the Philippines uncovered that the money never existed, triggering the collapse.
• 🏦 The collapse caused ripple effects, impacting investors, pension funds, and payment companies tied to Wirecard.

Q & A

What was Wirecard's core business model when it was first founded?

Wirecard was founded in 1999, providing online payment services that acted as intermediaries between consumers and producers for fast, safe, and convenient money transfers, benefiting from the e-commerce boom.

How did Wirecard's share price collapse so dramatically in such a short time?

Wirecard’s share price fell from 100 euros to less than 2 euros over nine days due to the revelation that 2 billion US dollars was missing from their accounts, leading to their insolvency and creditors being owed 4 billion US dollars.

Who was the CEO of Wirecard and what image did he project?

The CEO of Wirecard was Marcus Braun, who projected the image of a tech visionary, often compared to Steve Jobs, especially after adopting the black turtleneck. He was seen as an innovative leader by many, though others found his speeches vague and filled with buzzwords.

What were some early signs of financial irregularities at Wirecard?

As early as 2008, financial auditors reviewed allegations in Wirecard’s balance sheets, and by 2015, there were reports of a 250 million euro gap in their balance sheet. Despite these warnings, Wirecard dismissed them as short-seller propaganda.

How did Wirecard attempt to handle allegations of money laundering and fraud?

Wirecard consistently denied allegations of money laundering and financial irregularities, defending itself by accusing short sellers of spreading false information. The company even sued the Financial Times for misuse of trade secrets when it reported on these irregularities.

What role did third-party companies in foreign countries play in Wirecard’s operations?

Wirecard used third-party companies in regions like Singapore, Dubai, and the Philippines to process payments in areas where it did not have licenses. These third parties were crucial to Wirecard’s operations, but investigations revealed that many of these companies were fraudulent.

What did investigators discover about Wirecard’s supposed bank accounts in the Philippines?

Investigators found that the banks in the Philippines, where Wirecard claimed to hold 2 billion US dollars, had no knowledge of the accounts. In fact, one of Wirecard's supposed partner companies in the Philippines was a retired man’s home, revealing the extent of the fraud.

What was the response of Wirecard’s auditors to the financial scandal?

Wirecard hired KPMG to audit their financials in 2020, but KPMG could not verify most of Wirecard’s profits from the previous two years, which further escalated the scandal and led to Marcus Braun’s resignation and subsequent arrest.

What impact did Wirecard’s collapse have on other businesses and individuals?

Wirecard’s collapse had widespread effects, including German pensioners losing money and other businesses like payment company Pocket having to freeze funds, leaving some clients in financial distress without access to essential services like gas and water.

What regulatory failures were highlighted by the Wirecard scandal?

The Wirecard scandal exposed failures by regulators, auditors, and financial watchdogs like Bafin, who did not thoroughly investigate the company despite numerous red flags. Some analysts and regulators even shielded Wirecard, treating it as a national tech success story.