15 ms·

Wirecard CEO exits as search for missing billions hits dead end in Asia

409 points by hhs 6y ago

H8crilA 6y ago
A very good thread summarizing what happened in this massive fraud: https://mobile.twitter.com/DonutShorts/status/1273690362608078848 https://mobile.twitter.com/DonutShorts/status/12736903626080... Expect more revelations in the coming year or so: > "Only when the tide goes out you find out who has been swimming naked" - Warren Buffet > "The fraud cycle follows the business cycle" - Jim Chanos
- blablabla123 6y ago
  Since years there have been allegation of fraud towards Wirecard. [1] I cannot understand how they even managed to make an IPO. [1] https://translate.google.com/translate?sl=auto&tl=en&u=https%3A%2F%2Fwww.sueddeutsche.de%2Fgeld%2Fgroesster-aktienbetrugsfall-in-deutschland-herbe-beschuldigungen-gegen-anlegerschuetzer-1.1005268 https://translate.google.com/translate?sl=auto&tl=en&u=https...
  - gizmo 6y ago
    They didn't just IPO, they were included in the DAX 30! In addition, Wirecard claimed to be vastly more profitable than their competitors, but they never actually explained how they made all their money. There was certainly enough smoke to warrant an investigation, but regulators were asleep at the wheel.
    - blablabla123 6y ago
      "No one knew how they did it. One theory was that they were active in more “risky” areas such as online gambling and porn sites but no one cared as long as reported profits and the stock price went up." That's actually the explanation. 10 years ago I ran a small project and they were the only Payment Service Provider that agreed to work with us. At that time at least in Germany there were no Paypal and Stripe to directly process Credit Cards etc. for small websites. IIRC their fees - especially for refunds - were much higher than those of competitors. Refund rates are normally in the sub percentage but they would accept higher than usual refund rates without cancelling the account. It's easy to start a business in an area where there is a vacuum of competitors. (FWIW I think cancelling the account with them to switch over to Paypal took almost 2 years...)
      - hef19898 6y ago
        I have trouble to see the risk with processing payments for online porn. Sure, some institutions might have a "moral" issue, but otherwise? Gambling could be different, so.
        ojnabieoot 6y ago
        PornHub has an enormous problem with sexual trafficking and child abuse, which means that financing PornHub exposes you to serious legal liability (and an unambiguous moral responsibility). So it's not just institutional prudishness - online porn is full of vicious criminals.
        anoncareer0212 6y ago
        No
        arbitrary_name 6y ago
        Wow so I guess Facebook needs to be classified as high risk as well? Please don't spread misinformation like that.
        chefkoch 6y ago
        I guess there are a lot of chargebacks from people entering their details for "trials" as well as stolen cards being used.
        objclxt 6y ago
        > I have trouble to see the risk with processing payments for online porn. Huge number of chargebacks. A previous employer of mine had a subsidiary that handled premium rate SMS and phone call billing, a lot of which was adult services. You'd see a huge amount of contested charges, for reasons such as: * Buyer's remorse (get drunk, wake up the next day, realise you spent $500 on porn) * Unsupervised minor - your kid "borrows" your credit card for some online "research" * Outright fraud - stolen cards, etc.
        6y ago
    - weego 6y ago
      Also last year Deutsche Bank gave the CEO a €150 million personal loan using his Wirecard stock as collateral. This isn't a case of a few errors and lack of a little due diligence.
      - jansan 6y ago
        Just for the record, Deutsche Bank is a private company with the majority of stocks owned by non-German investors. It is not to be confused with the Bundesbank, which is something like the German FED.
        mancini0 6y ago
        it's a public company, its shares are tradeable on exchanges
        fermigier 6y ago
        "Private" and "public" companies don't have the same meaning in our side of the Pond. In France, "public" = "state-owned" and "private" = "not public".
        hef19898 6y ago
        Oh, wasn't aware of that. Not that I'm surprised that is Deutsche Bank. They have a long track record of shady dealings reaching back to, as far as I remember, the 90s.
        netsharc 6y ago
        "Bank of America", anyone? (Just talking how that name could also be misunderstood, I have no idea if they're scumbags or not).
      - mschuster91 6y ago
        > Also last year Deutsche Bank gave the CEO a €150 million personal loan using his Wirecard stock as collateral. That kind of stuff is pretty common though, Elon Musk has about 15 billion dollars, 100x that amount (!), of his Tesla stocks posted as collateral for personal loans: https://www.theverge.com/2020/5/8/21252487/elon-musk-personal-finances-billionaire-wall-street-journal-go-read-this https://www.theverge.com/2020/5/8/21252487/elon-musk-persona... And Deutsche Bank is a big player in this kind of business, remember their involvement with Trump?
    - DagAgren 6y ago
      Regulators were definitely not asleep at the wheel. They were apparently actively defending them, for instance by attempting to sue the Financial Times for reporting on the irregularities.
    - ksherlock 6y ago
      Being asleep at the wheel would be an improvement. Last year, BaFin -- the german regulators -- investigated Financial Times for market manipulation (ie, reporting on Wirecard's suspicious accounting practices). https://aboutus.ft.com/en-gb/announcements/ft-statement-on-wirecard-reporting-1/ https://aboutus.ft.com/en-gb/announcements/ft-statement-on-w...
      - ryneandal 6y ago
        Agreed. Ignorance would be more ideal than corruption.
  - StreamBright 6y ago
    You can hide a lot of things in an international crime organisation.
  - NonEUCitizen 6y ago
    IPO'd via reverse merger, according to MSN article linked to from other post https://news.ycombinator.com/item?id=23573350 https://news.ycombinator.com/item?id=23573350 : "Wirecard's origins date back to 1999, when its Berlin-based predecessor InfoGenie was founded. Wirecard listed its shares on Frankfurt's stock exchange through a reverse merger with InfoGenie in 2005."
  - ashika 6y ago
    ft's reporting on this story has been great throughout. I would recommend anyone looking to get more background to read the solid investigative pieces Olaf Storbeck and Dan McCrum have done over the past few years1[1]. they deserve a lot of credit for pursuing this likely enron level accounting malfeasance story to the top. [1] https://www.ft.com/content/d080c3fc-c561-11e8-8670-c5353379f7c2 https://www.ft.com/content/d080c3fc-c561-11e8-8670-c5353379f...
- ilamont 6y ago
  When the $WDI scandal is viewed in the context of many German banking frauds & the VW stock rigging by Porsche, investors can rightly ask whether German financial regulation is anything but a fig leaf. The same could be said for many financial regulators all over the world -- clubby relationships with financiers, vulnerable to lobbying, "looking the other way" when there are signs of problems, letting the big fish off the hook while coming down hard on small players, etc. In some countries it's much worse, with outright fraud involving the regulators themselves.
  - StreamBright 6y ago
    This also shows how inefficient government legislation is when the potential risk and impact punishment of being caught is low. These companies and all the people (not only few) should receive a substantial penalty. I think it is was not really sufficient in the VW case. We will see how it is going to be with WD.
  - denzil_correa 6y ago
    The common thread in all of these are post-hoc discoveries of irregularities. In many cases, these are carried over many years and months without being detected. If one needs to address this issue, a near real-time approach would be needed. Otherwise, such operations will continue to take place.
    - boringg 6y ago
      Way too expensive to regulate in real time and the sample size for regulating is pretty low. What you need to do is make the punishment for bad behavior strong enough to minimize fraud. I would like to think most actors are good actors and we take the bad actors and make an example to the rest of the industry what to expect if caught. It will always be a cat and mouse game.
      - amanaplanacanal 6y ago
        If the chance of getting caught is low, I'm not sure stronger penalties make that much difference. See the drug war for example.
- TheOtherHobbes 6y ago
  Are there any honest, reputable operators in the financial industry? Between Enron, S&L, Lehman, WorldCom, AIG, Wirecard, Madoff, VW, gold price fixing, 1MDB, and all the "lost" BTC stories - among so many others - it seems like a question that needs to be asked.
  - enriquto 6y ago
    > Are there any honest, reputable operators in the financial industry? The fact that they choose to label their unproductive activities as an "industry" and their scams as "products" means that the answer is no.
  - qppo 6y ago
    I mean not all of those companies you listed are in the financial industry. VW didn't even commit financial crimes, it was regulatory fraud. I don't know if the 1MDB is in the same league either, that's plain government corruption. I feel like if you're going to ask that question then focus on dishonest financiers and not every business that has broken the law.
  - the-dude 6y ago
    You forgot HSBC
    - _curious_ 6y ago
      +Countrywide, Indymac, and Bear Stearns
  - pjc50 6y ago
    There are degrees of this issue; any business handling money is going to attract fraud, the question is how well the internal controls deal with it and whether management are in on it. At one end is Lehman, which was incredibly over-leveraged and only slightly fraudulent ( https://www.accountancyage.com/2010/12/21/ey-sued-over-lehmans-audit/ https://www.accountancyage.com/2010/12/21/ey-sued-over-lehma... ), but set out to be a legit investment bank. AIG is in a roughly similar category. There was some fraud: https://www.sandiegouniontribune.com/sdut-gen-re-aig-trial-012709-2009jan27-story.html https://www.sandiegouniontribune.com/sdut-gen-re-aig-trial-0... - but the collapse was due to leverage. At the other end are Madoff and 1MDB, which were intentionally fraudulent from the beginning. The "lost" BTC stories are just off in outer space; the bitcoin ecosystem doesn't acknowledge fraud or accounting control as a concept, because that goes against "code is law" and transaction irreversability.
- Alex3917 6y ago
  Massive fraud? But an independent auditor just confirmed their financial position is 4x better than Tether. /s
  - H8crilA 6y ago
    Hey, massive does not mean the biggest out there :). I can't wait to see how the Tether story ends.
    - raducu 6y ago
      Tether's story ends only if the owners get too greedy and exit scam OR if a large minority of people holding tether decide to cash out -- which shouldn't happen since such whales benefit from tether and other cryptocurrencies money laundering operations. Also, given that there are days when tether issued 3bln dollars to prop bitcoin, I'm sure the owners have made a lot of money by manipulating other legitimate cryptocurrencies prices.
- piker 6y ago
  Actually didn't catch much of a summary at all there. Just winners and losers?
  - dopamean 6y ago
    same. not really a very good thread.
    - AndrewBissell 6y ago
      It's less a summary of "what happened" (which is already quite familiar to most of the shorts and FinTwit types who follow DonutShorts), and more of an accounting of who dropped the ball and who was on the right side of the Wirecard fraud.
  - istvanp 6y ago
    Try this, it's the entire thread in one page: https://threadreaderapp.com/thread/1273690362608078848.html https://threadreaderapp.com/thread/1273690362608078848.html
    - distances 6y ago
      Still doesn't help. It doesn't say at all what actually happened, expect for a vague mention of made-up cash.
    - thaumasiotes 6y ago
      The original link was already the entire thread on one page. The problem we're complaining about is that the thread very clearly isn't intended to say what happened. No effort is made in that direction; there is not even a hint that it was a goal. It's about as appropriate of a recommendation as an unrelated article in National Geographic.
- eatbitseveryday 6y ago
  > > "Only when the tide goes out you find out who has been swimming naked" - Warren Buffet What does this mean?
  - aspenmayer 6y ago
    The emperor’s clothes exist in a super-position of both existing and non-existing. When the tide goes out, this results in the wave function collapse of the super-positional state of the emperor’s clothes, thus demonstrating the observer effect on textile systems. Just a joke. It means that you can’t tell who lost their shirt til all the bubbles are drained from the pool, and we’re left with ourselves, each other, and our new shared reality.
  - SideburnsOfDoom 6y ago
    It means that it's easier to cheat when times are good. But when there's an economic downturn (tide goes out, in the metaphor), that's when concealed problems can't be hidden any longer.
  - chooseaname 6y ago
    Assuming naked swimmers wouldn't continue to swim as the tide goes out, you would find them laying on the sandy beach with their no-nos hanging out.
    - hef19898 6y ago
      Unless the swimmers are to comfortable in the water to see the tide going out. In which case they are caught with their pants down, well without pants to begin with. The smart swimmers are drinking cocktails by then, courtesy of SoftBank more often than not.
  - superhuzza 6y ago
    That it's easy to hide or overlook financial problems in a good market. Once the market is tougher, those problems come to light.
- thesumofall 6y ago
  > Losers con’t: E&Y – One word: cash. If your audit can’t confirm the cash in the bank, you need to find another business. Full stop. E&Y is the auditor of record in two other major suspected frauds Not sure I get this. The news reports also seem to claim that E&Y rejected to sign the balance sheets. Or was that just after everything went haywire?
  - this_user 6y ago
    EY had been WDI's auditor for well over a decade. They only now refused to sign after KPMG wouldn't give the company a clean bill of health in April. Obviously, these shady practices didn't just start in the last few months, so there are clearly things that EY should have flagged much earlier, but failed to do so. And for that, they will be on the hook.
    - thesumofall 6y ago
      Thanks for clarifying. Confusing story if you’re just starting to get into it
- thaumasiotes 6y ago
  > A very good thread summarizing what happened in this massive fraud: > https://mobile.twitter.com/DonutShorts/status/1273690362608078848 https://mobile.twitter.com/DonutShorts/status/12736903626080... Huh? I read the thread. It calls out a bunch of people who were involved; it doesn't discuss what happened at all.
  - deleted 6y ago
    [deleted]
gizmo 6y ago
Wirecard's massive fraud has been documented for over a decade, but the German financial oversight group BAFIN refused to do their job and investigate the fraud claims: https://valueandopportunity.com/2020/06/19/wirecard-the-german-enron-a-very-personal-history-2008-2020/ https://valueandopportunity.com/2020/06/19/wirecard-the-germ... There are some real lessons here about journalism, efficient markets, govt oversight, and truth prevailing in the very long run.
- JumpCrisscross 6y ago
  Not only that, the German financial regulatory response was to ban short selling of Wirecard’s stock.
  - makomk 6y ago
    The German financial regulators also launched a criminal investigation into the journalists investigating and reporting on the fraud: https://www.ft.com/content/8e1948be-6060-11e9-b285-3acd5d43599e https://www.ft.com/content/8e1948be-6060-11e9-b285-3acd5d435... Their handling of this was nothing short of asounding.
    - StreamBright 6y ago
      And some people claim that EU is so much better than the rest of the world in terms of governments and legislation.
    - phkahler 6y ago
      Oh my. I thought Germany was a shining star in the EU, but not any more.
      - usrusr 6y ago
        In finance and fintech, many in Germany like to think of themselves as a bit of an underdog compared to London, New York and so on. This can be a dangerous source of moral licencing.
fabian2k 6y ago
There are 1.9 billion EUR missing, not sure if the implication is that they were stolen or never existed in the first place. I also can't really think of any possible explanation for this to go so far when the banks in question say that the account never existed at all. It doesn't seem believable that anyone seriously investigated the potential fraud in the last months or years, and the scandal has been public for a while now.
- jansan 6y ago
  You cannot believe how sophisticated fraud can be. There was an amazing fraud scheme in Germany in the 1990s by a company called FlowTex. Their business was selling drilling machines for the oil and gas industry. The amazing part about the fraud was that they sold 3000 drilling machines, but only about 300 actually existed. You would think it should be easy to simply count the existing drilling machines, but they changed the serial number plates and presented the same machines over and over again to investors and auditors. Just unbelievable that this worked for a few years.
  - mtmail 6y ago
    https://en.wikipedia.org/wiki/FlowTex https://en.wikipedia.org/wiki/FlowTex Saw a documentary with the founder the other day, served 7 of a 12 year prison sentence.
    - tibbydudeza 6y ago
      Interesting here is a documentary on this https://www.youtube.com/watch?v=fQ5m0Gv-xKM https://www.youtube.com/watch?v=fQ5m0Gv-xKM
    - netsharc 6y ago
      It makes me wonder if a life of white collar crime is worth it... Before MEGA, Kim Dotcom was someone who took investor money and spent it lavishly (his website had a lot of photos of luxury cars, villas and parties), skimming his Wikipedia, it says he only got a suspended sentences from the German courts...
sneeze-slayer 6y ago
NPR's Invisibilia did a really interesting show/podcast on one of the biggest short sellers of Wirecard and how he has been harassed for the past few years. I highly recommend people listen to if if they are interested in this crazy Wirecard tale! It's titled "Trust Fall" https://www.npr.org/transcripts/868001948 https://www.npr.org/transcripts/868001948
- MR4D 6y ago
  Chilling! That would scare the heck out of me.
- empath75 6y ago
  “Never threaten to cost someone more than it would cost to have you killed.” is a reasonable rule to live by.
  - dbuder 6y ago
    Coward.
  - gspr 6y ago
    That seems like a rule that would have a terrifying chilling effect on a lot of legitimate lawsuits.
    - raducu 6y ago
      Luckily a lot of people live in the civilized world, where the high likelihood of being caught and prosecuted for murder and spending a lot of time in jail, make murder a not so reasonable option -- assuming we are talking about psychopaths willing to kill someone for financial gain. Murder is nowadays an option for few criminal organizations -- such as the USA government, the British Royal House (remember, Epstein didn't kill himself), the Russian Government or the mafia or some drug gangs.
      - tbonepickens 6y ago
        "remember, Epstein didn't kill himself" - citation needed I get that Epstein's death was fishy, I myself very much think so, but "Epstein didn't kill himself" isn't a factual statement because there still lies a possibility that he took his own life
easytiger 6y ago
Slightly awkward tweet from him: > We are overachievers. Wirecard’s business is going strong into the future and we are very much looking forward to a successful year. https://mobile.twitter.com/_MarkusBraun/status/1228257269567119361 https://mobile.twitter.com/_MarkusBraun/status/1228257269567...
- pieterhg 6y ago
  Old tweet
  - easytiger 6y ago
    Feb this year. Not old.
    - umeshunni 6y ago
      Well, he said pretty much the same thing today: https://mobile.twitter.com/_MarkusBraun/status/1273974132531658754 https://mobile.twitter.com/_MarkusBraun/status/1273974132531...
adventured 6y ago
And there's Masayoshi Son and SoftBank, plowing $1 billion into Wirecard a year ago, for a 5.6% stake. Mr. Enabler seems to have secured a prime seat for many of the big frauds & scandals in tech from the past few years. At this point regulators should just be tracking SoftBank to watch where they've stuffed the Saudi money (or in this case, it's a very unusual UAE & SoftBank financing arrangement). Bloomberg story out right now: "The meltdown at Wirecard AG is raising questions about the company’s complicated relationship with the troubled SoftBank Group Corp." http://archive.is/ipWck http://archive.is/ipWck
- easytiger 6y ago
  My favourite SoftBank investment was the automated pizza van thing. I can only hope SoftBank had shares in a failing robotics company that it needed to funnel money to
  - Danieru 6y ago
    The pizza van guy was active here on hacker news right? I remember seeing posts from a robot pizza guy. Shame they got caught up with softbank.
    - easytiger 6y ago
      I don't think being caught up with SoftBank is the issue. More that SoftBank have a subset of very negative indicators in their selection process
      - Nasrudith 6y ago
        It seems that lack of a remotely viable businesses model and trying to scale things that don't are are common SoftBank flaws. Like WeWork and the countless scooter and ride share at a loss companies with little true barrier to entry and can hardly pay for themselves while infamously underpaying their workforce.
  - mtmail 6y ago
jansan 6y ago
Anyone remember L&H, the famous computer translation company that went bankrupt in 2001? At one point they had a whopping market capitalization of almost 10 billion US$! IIRC they also claimed that a large sum of money somehow got missing in Asia (South Korea I think). But given that the management actually went to jail, it seems the fraud actually originated in their headquaters in Belgium.
- easytiger 6y ago
  I didn't when you wrote L&H, but on searching and finding it was https://en.m.wikipedia.org/wiki/Lernout_%26_Hauspie https://en.m.wikipedia.org/wiki/Lernout_%26_Hauspie I do indeed remember them and their software.
  - aashu_dwivedi 6y ago
    I didn't remember them by name but after reading the wikipedia page, I remember they are the company which acquired Drangon systems in liu of a large number of stocks.
    - weinzierl 6y ago
      If I remember the story correctly the founders of Dragon Systems sued the bank that handled the acquisition. They claimed the bank convinced them to take stock and not cash at a point in time when the same bank already had been preparing for the inevitable bankruptcy of L&H. They lost because M&A was considered a different branch of the bank and not supposed to know about the imminent bankruptcy. BTW: The founders of Dragon Systems are a married couple with an interesting bio too.
ckastner 6y ago
As I mentioned in another submitted story: SoftBank really knows how to pick them. It invested 1 billion about a year ago [1]. [1] https://www.bloomberg.com/news/articles/2019-04-23/softbank-.. https://www.bloomberg.com/news/articles/2019-04-23/softbank-....
- jansan 6y ago
  But not directly. WSJ wrote "Funding came from personal accounts of a group of SoftBank employees and an outside investor." Doesn't make it better, does it?
  - lazyjones 6y ago
    Who knows whether that investment actually happened at this point...
  - koheripbal 6y ago
    It's definitely better for SoftBank.
- samizdis 6y ago
  Got a file not found with the link above, but this [1] is a few hours ago: "SoftBank Support for Wirecard Under Scrutiny After Meltdown" [1] https://www.msn.com/en-us/finance/companies/softbank-support-for-wirecard-under-scrutiny-after-meltdown/ar-BB15HWDO https://www.msn.com/en-us/finance/companies/softbank-support...
  - grumple 6y ago
    Do we consider a softbank investment to be a red flag at this point?
- koheripbal 6y ago
  corrected link: https://www.bloomberg.com/news/articles/2019-04-23/softbank-is-said-to-consider-acquiring-5-stake-in-wirecard https://www.bloomberg.com/news/articles/2019-04-23/softbank-...
deleted 6y ago
[deleted]
LatteLazy 6y ago
We really do need some process where by the accounts of large companies are reconciled with reality. I understand completely that this is not possible for all the numbers investors want to see (Profit is made up after all). But there should be a requirement to report certain hard numbers (cash revenues and cash held for instance) that should be audited and correct to the penny on a given day. If a business claims to have received 1m $/£/E in cash sales, they should be able to show their accountant credit transactions for that amount and 0.1% of those should be checked by calling the customer and confirming they paid the money. The same applies for cash on hand on a historic day. Nothing will make fraud impossible, but right now it's just so easy...
- eigenvalue 6y ago
  They basically do this now (or are supposed to) but only once a year for the annual audit. It gets complicated when you have related party transactions, where separate private companies that are secretly controlled by the CEO can claim that they owe money to the main company. Eventually these things get found out, like in this case, but by then a lot of investors can lose their money.
- withinthreshold 6y ago
  Which is exactly the usual audit procedure - a sample of account balances and turnover is tested (i.e., confirmed) with the counterparty as part of testing.
x87678r 6y ago
2 Billion? Isn't that just a regular burn rate for a fintech startup? I'll assume this company just gets some funding then continues on its way.
- s_dev 6y ago
  Who's gonna fund a company that just exposed itself as having fraudulent accounting?
  - nikanj 6y ago
    SoftBank
tex0 6y ago
Can someone please explain to me how 1.9B can go missing? I'm probably too naive, but I really don't how that much money can get "lost".
- H8crilA 6y ago
  It was never there.
- weinzierl 6y ago
  Bloomberg article from yesterday[1] phrased it as "[..] auditors couldn’t find about 1.9 billion euros ($2.1 billion) in cash [..]" and "[..] were unable to find accounts [..]" I, too, was wondering what to think. How can I imagine to be unable to find an account? [1] https://www.bloomberg.com/news/articles/2020-06-18/wirecard-drops-in-early-trading-before-delayed-financial-results https://www.bloomberg.com/news/articles/2020-06-18/wirecard-...
  - jansan 6y ago
    As I understand it Wirecard had a written confirmation by two Phillipine banks that there is 2 biion in desposits. E&Y got suspicious, because the confirmations arrived really fast, much faster thank banks usually take to issue these papers. So they sent a guy in the Phillipines to the banks to investigate. The banks claimed that there are no deposits and the documents were issues by an employee without authorization.
- x87678r 6y ago
  Acquiring Chinese companies will do that.
- anotheryou 6y ago
  The proof was bank statements about 2 accounts on philipinian banks. Those where bad fakes as E+Y noticed: - arrived to early (usually takes month) - issued in € not $ after calling up one of the banks: - 2/3 signatures fake - 3rd signature by a person not authorized to sign it So someone definitely made these statements up in a criminal act. This account does not belong to wirecard directly, but to a trustee or something, which seems to be a normal practice. So in theory he could have stolen the money. However even the choice of this lawyer is fishy, he specializes in family law... More fishy stuff know even last year: https://www.ft.com/content/cd12395e-4fb7-11e9-b401-8d9ef1626294 https://www.ft.com/content/cd12395e-4fb7-11e9-b401-8d9ef1626...
baxtr 6y ago
It’s a shame that this company is part of the DAX, Germany’s large cap index of its 30 largest companies. I hope they get expelled soon
- H8crilA 6y ago
  They already are, their participation drives down with the market cap :D On a more serious note - Merkel will have to do some serious firing and locking up in prison. At least I hope she does that, if not frauds will only multiply.
  - corty 6y ago
    Merkels party CDU is very much the political arm of the corrupt old boys network. E.g. her former minister of finance, now head of the Bundestag, Schäuble, was deeply involved in a corruption scandal. Currently that same network seems to rear its head in the Amthor scandal. Therefore I doubt very much that a lot of firing and locking up will happen, just some token amount with a sprinkling of shuffling positions and failing upwards...
Mordan 6y ago
Someone explain to me why MS was forced to allow competing browsers and today Apple forces you to use their own browser engine? Isn't that a double standard?
- ubermonkey 6y ago
  I mean, I can, but this is probably the wrong thread. You're also slightly off about "allowing" competing browsers. MS never limited other browsers in Windows; you were always free to download another (and there were others). It just gave IE an absurd inside track by including it FREE with Windows and making it the default, which was hugely damaging to Netscape (which, at the time, was charging money for a browser; yes, this sounds bananas today). This was a textbook example of monopolistic behavior, since at the time Microsoft OWNED computing. There wasn't another viable platform. The Mac was, at the time, circling the drain. Desktop Linux didn't exist. If you wanted a computer, you ran Windows, full stop. MSFT was leveraging their enormous monopoly power to give them a monopoly in another market (browsers), and that's a big anti-trust no-no. Apple has nowhere near that kind of market power. The iPhone is a minority player in a huge market -- much bigger than the PC market Microsoft dominated in the 90s. Android holds a majority position there. This means Apple doesn't have a monopoly. You can, and people do, buy something else that allows you do configure basically whatever you want. Apple isn't distorting or damaging the phone/mobile market with their behavior, as MSFT was. Apple definitely DOES have enormous influence and power in mobile computing. That's very true. But because they are a minority player, they don't control the market. And so there's no real legal argument on antitrust grounds to compel them to do anything differently.
  - rrdharan 6y ago
    Desktop Linux definitely did exist. I distinctly remember running Slackware with a pirated AccelX server in fall 1997 and messing around with Red Hat (first released in 1995) around that time. The lawsuit was filed in 1998 and arguments were in 2000/2001.
    - ubermonkey 6y ago
noneeeed 6y ago
Can anyone recommend a good overview read of this whole thing? I seem to have missed it all.
- fluffything 6y ago
  There is none yet, but there is enough material for a Netflix mini-series.
6510 6y ago
Centralization and scale are amazingly efficient but when things go wrong it similarly scales all the way. But hey, at least it wasn't 2.3 trillion this time.
pythonwizz 6y ago
Wirecard has been accused before of fraud by so called "short sellers". The document published (2 years ago?) showed a tremendous, extraordinary complex network of international corporations. Such complex setups have a very limited purpose. It can basically be only tax "optimization", hide fraud or hide ownership (UBO). After having seen this PDF I would not touch the Wirecard stock. By the way, I think Alibaba is opening two new corporations. Per day. You may also want to read at Bronte Capital about Alibaba.
- boldslogan 6y ago
  Can you remember any keywords to find that pdf or link with the multiple company set up about this? Thanks for the alibaba tip.
  - pythonwizz 6y ago
    No I dont. Wirecard went very aggressively against the accusations. The discussion board where it was discussed removed the link since Wirecard were suing everybody. Could have been this one, but I am not sure. Just peaked into it and did not see the page with all the interrelated companies. https://www.scribd.com/document/301557004/Wirecard-pdf https://www.scribd.com/document/301557004/Wirecard-pdf
lazyjones 6y ago
What a strange situation. WireCard immediately looked dubious when I did some research about it last year (as a regular stock investor) and I often stumbled over opinions like this one https://www.deraktionaer.de/artikel/aktien/markus-krall-lufthansa-oder-wirecard-halte-mich-an-warren-buffett-20202608.html https://www.deraktionaer.de/artikel/aktien/markus-krall-luft... (German, sorry) where somewhat reputable people said they would never consider investing into WireCard, without giving a specific reason. The business model of a payment provider is straightforward and ought to be hard to get completely wrong, "what's there to be afraid of that nobody wants to speak about?", I was wondering. In hindsight it's like everybody knew or had a gut feeling something was fishy but decided not to talk about it.
miohtama 6y ago
Wirecard is issuer of most crypto debit cards https://cointelegraph-com.cdn.ampproject.org/c/s/cointelegraph.com/news/major-crypto-debit-card-issuer-reportedly-missing-21b-in-cash/amp https://cointelegraph-com.cdn.ampproject.org/c/s/cointelegra...
everybodyknows 6y ago
As reported by the German press: https://m.dw.com/en/wirecard-ceo-markus-braun-resigns/a-53870101 https://m.dw.com/en/wirecard-ceo-markus-braun-resigns/a-5387...
deleted 6y ago
[deleted]
dang 6y ago
Not much recent HN discussion on this. Some here: https://news.ycombinator.com/item?id=23438323 https://news.ycombinator.com/item?id=23438323. But this, from a year ago, reads interestingly now: https://news.ycombinator.com/item?id=19737344 https://news.ycombinator.com/item?id=19737344.
- dmix 6y ago
  Looks like the fraud was even worse than what last year's FT investigation was suggesting. Originally it was just a few million transferred between multiple subsidiaries to fake sales figures to meet quarterly projections. Now actually "losing" billions of dollars sounds much worse. I guess where there's smoke there's often fire.
deleted 6y ago
[deleted]
actuator 6y ago
The article didn't have more details on it but it seems like EY didn't sign off on accounts after KPMG report indicated fraud. Shouldn't the blame lie on EY as well, as they failed in their job as an auditor, shouldn't they have been the ones to found as they had all the internal info while auditing.
knlam 6y ago
Sorry for my ignorance, according to the source, Wirecard hired KPMG last year to conduct an independent audit to address allegations by FT. Why would anyone who run the fraud hired an auditor to expose their fraud? Do they think they can get away with it? Why not just ignore the allegations?
plerpin 6y ago
Ah, crypto and fraud, peas in a pod.
andi999 6y ago
When people think about a billion dollar exit for a startup founder, not exactly this picture comes up :-)

409 points by hhs 6y ago

A very good thread summarizing what happened in this massive fraud: https://mobile.twitter.com/DonutShorts/status/1273690362608078848 https://mobile.twitter.com/DonutShorts/status/12736903626080... Expect more revelations in the coming year or so: > "Only when the tide goes out you find out who has been swimming naked" - Warren Buffet > "The fraud cycle follows the business cycle" - Jim Chanos

blablabla123 6y ago
Since years there have been allegation of fraud towards Wirecard. [1] I cannot understand how they even managed to make an IPO. [1] https://translate.google.com/translate?sl=auto&tl=en&u=https%3A%2F%2Fwww.sueddeutsche.de%2Fgeld%2Fgroesster-aktienbetrugsfall-in-deutschland-herbe-beschuldigungen-gegen-anlegerschuetzer-1.1005268 https://translate.google.com/translate?sl=auto&tl=en&u=https...
- gizmo 6y ago
  They didn't just IPO, they were included in the DAX 30! In addition, Wirecard claimed to be vastly more profitable than their competitors, but they never actually explained how they made all their money. There was certainly enough smoke to warrant an investigation, but regulators were asleep at the wheel.
  - blablabla123 6y ago
    "No one knew how they did it. One theory was that they were active in more “risky” areas such as online gambling and porn sites but no one cared as long as reported profits and the stock price went up." That's actually the explanation. 10 years ago I ran a small project and they were the only Payment Service Provider that agreed to work with us. At that time at least in Germany there were no Paypal and Stripe to directly process Credit Cards etc. for small websites. IIRC their fees - especially for refunds - were much higher than those of competitors. Refund rates are normally in the sub percentage but they would accept higher than usual refund rates without cancelling the account. It's easy to start a business in an area where there is a vacuum of competitors. (FWIW I think cancelling the account with them to switch over to Paypal took almost 2 years...)
    - hef19898 6y ago
      I have trouble to see the risk with processing payments for online porn. Sure, some institutions might have a "moral" issue, but otherwise? Gambling could be different, so.
      - ojnabieoot 6y ago
        PornHub has an enormous problem with sexual trafficking and child abuse, which means that financing PornHub exposes you to serious legal liability (and an unambiguous moral responsibility). So it's not just institutional prudishness - online porn is full of vicious criminals.
        anoncareer0212 6y ago
        No
        arbitrary_name 6y ago
        Wow so I guess Facebook needs to be classified as high risk as well? Please don't spread misinformation like that.
      - chefkoch 6y ago
        I guess there are a lot of chargebacks from people entering their details for "trials" as well as stolen cards being used.
      - objclxt 6y ago
        > I have trouble to see the risk with processing payments for online porn. Huge number of chargebacks. A previous employer of mine had a subsidiary that handled premium rate SMS and phone call billing, a lot of which was adult services. You'd see a huge amount of contested charges, for reasons such as: * Buyer's remorse (get drunk, wake up the next day, realise you spent $500 on porn) * Unsupervised minor - your kid "borrows" your credit card for some online "research" * Outright fraud - stolen cards, etc.
        6y ago
  - weego 6y ago
    Also last year Deutsche Bank gave the CEO a €150 million personal loan using his Wirecard stock as collateral. This isn't a case of a few errors and lack of a little due diligence.
    - jansan 6y ago
      Just for the record, Deutsche Bank is a private company with the majority of stocks owned by non-German investors. It is not to be confused with the Bundesbank, which is something like the German FED.
      - mancini0 6y ago
        it's a public company, its shares are tradeable on exchanges
        fermigier 6y ago
        "Private" and "public" companies don't have the same meaning in our side of the Pond. In France, "public" = "state-owned" and "private" = "not public".
      - hef19898 6y ago
        Oh, wasn't aware of that. Not that I'm surprised that is Deutsche Bank. They have a long track record of shady dealings reaching back to, as far as I remember, the 90s.
        netsharc 6y ago
        "Bank of America", anyone? (Just talking how that name could also be misunderstood, I have no idea if they're scumbags or not).
    - mschuster91 6y ago
      > Also last year Deutsche Bank gave the CEO a €150 million personal loan using his Wirecard stock as collateral. That kind of stuff is pretty common though, Elon Musk has about 15 billion dollars, 100x that amount (!), of his Tesla stocks posted as collateral for personal loans: https://www.theverge.com/2020/5/8/21252487/elon-musk-personal-finances-billionaire-wall-street-journal-go-read-this https://www.theverge.com/2020/5/8/21252487/elon-musk-persona... And Deutsche Bank is a big player in this kind of business, remember their involvement with Trump?
  - DagAgren 6y ago
    Regulators were definitely not asleep at the wheel. They were apparently actively defending them, for instance by attempting to sue the Financial Times for reporting on the irregularities.
  - ksherlock 6y ago
    Being asleep at the wheel would be an improvement. Last year, BaFin -- the german regulators -- investigated Financial Times for market manipulation (ie, reporting on Wirecard's suspicious accounting practices). https://aboutus.ft.com/en-gb/announcements/ft-statement-on-wirecard-reporting-1/ https://aboutus.ft.com/en-gb/announcements/ft-statement-on-w...
    - ryneandal 6y ago
      Agreed. Ignorance would be more ideal than corruption.
- StreamBright 6y ago
  You can hide a lot of things in an international crime organisation.
- NonEUCitizen 6y ago
  IPO'd via reverse merger, according to MSN article linked to from other post https://news.ycombinator.com/item?id=23573350 https://news.ycombinator.com/item?id=23573350 : "Wirecard's origins date back to 1999, when its Berlin-based predecessor InfoGenie was founded. Wirecard listed its shares on Frankfurt's stock exchange through a reverse merger with InfoGenie in 2005."
- ashika 6y ago
  ft's reporting on this story has been great throughout. I would recommend anyone looking to get more background to read the solid investigative pieces Olaf Storbeck and Dan McCrum have done over the past few years1[1]. they deserve a lot of credit for pursuing this likely enron level accounting malfeasance story to the top. [1] https://www.ft.com/content/d080c3fc-c561-11e8-8670-c5353379f7c2 https://www.ft.com/content/d080c3fc-c561-11e8-8670-c5353379f...
ilamont 6y ago
When the $WDI scandal is viewed in the context of many German banking frauds & the VW stock rigging by Porsche, investors can rightly ask whether German financial regulation is anything but a fig leaf. The same could be said for many financial regulators all over the world -- clubby relationships with financiers, vulnerable to lobbying, "looking the other way" when there are signs of problems, letting the big fish off the hook while coming down hard on small players, etc. In some countries it's much worse, with outright fraud involving the regulators themselves.
- StreamBright 6y ago
  This also shows how inefficient government legislation is when the potential risk and impact punishment of being caught is low. These companies and all the people (not only few) should receive a substantial penalty. I think it is was not really sufficient in the VW case. We will see how it is going to be with WD.
- denzil_correa 6y ago
  The common thread in all of these are post-hoc discoveries of irregularities. In many cases, these are carried over many years and months without being detected. If one needs to address this issue, a near real-time approach would be needed. Otherwise, such operations will continue to take place.
  - boringg 6y ago
    Way too expensive to regulate in real time and the sample size for regulating is pretty low. What you need to do is make the punishment for bad behavior strong enough to minimize fraud. I would like to think most actors are good actors and we take the bad actors and make an example to the rest of the industry what to expect if caught. It will always be a cat and mouse game.
    - amanaplanacanal 6y ago
      If the chance of getting caught is low, I'm not sure stronger penalties make that much difference. See the drug war for example.
TheOtherHobbes 6y ago
Are there any honest, reputable operators in the financial industry? Between Enron, S&L, Lehman, WorldCom, AIG, Wirecard, Madoff, VW, gold price fixing, 1MDB, and all the "lost" BTC stories - among so many others - it seems like a question that needs to be asked.
- enriquto 6y ago
  > Are there any honest, reputable operators in the financial industry? The fact that they choose to label their unproductive activities as an "industry" and their scams as "products" means that the answer is no.
- qppo 6y ago
  I mean not all of those companies you listed are in the financial industry. VW didn't even commit financial crimes, it was regulatory fraud. I don't know if the 1MDB is in the same league either, that's plain government corruption. I feel like if you're going to ask that question then focus on dishonest financiers and not every business that has broken the law.
- the-dude 6y ago
  You forgot HSBC
  - _curious_ 6y ago
    +Countrywide, Indymac, and Bear Stearns
- pjc50 6y ago
  There are degrees of this issue; any business handling money is going to attract fraud, the question is how well the internal controls deal with it and whether management are in on it. At one end is Lehman, which was incredibly over-leveraged and only slightly fraudulent ( https://www.accountancyage.com/2010/12/21/ey-sued-over-lehmans-audit/ https://www.accountancyage.com/2010/12/21/ey-sued-over-lehma... ), but set out to be a legit investment bank. AIG is in a roughly similar category. There was some fraud: https://www.sandiegouniontribune.com/sdut-gen-re-aig-trial-012709-2009jan27-story.html https://www.sandiegouniontribune.com/sdut-gen-re-aig-trial-0... - but the collapse was due to leverage. At the other end are Madoff and 1MDB, which were intentionally fraudulent from the beginning. The "lost" BTC stories are just off in outer space; the bitcoin ecosystem doesn't acknowledge fraud or accounting control as a concept, because that goes against "code is law" and transaction irreversability.
Alex3917 6y ago
Massive fraud? But an independent auditor just confirmed their financial position is 4x better than Tether. /s
- H8crilA 6y ago
  Hey, massive does not mean the biggest out there :). I can't wait to see how the Tether story ends.
  - raducu 6y ago
    Tether's story ends only if the owners get too greedy and exit scam OR if a large minority of people holding tether decide to cash out -- which shouldn't happen since such whales benefit from tether and other cryptocurrencies money laundering operations. Also, given that there are days when tether issued 3bln dollars to prop bitcoin, I'm sure the owners have made a lot of money by manipulating other legitimate cryptocurrencies prices.
piker 6y ago
Actually didn't catch much of a summary at all there. Just winners and losers?
- dopamean 6y ago
  same. not really a very good thread.
  - AndrewBissell 6y ago
    It's less a summary of "what happened" (which is already quite familiar to most of the shorts and FinTwit types who follow DonutShorts), and more of an accounting of who dropped the ball and who was on the right side of the Wirecard fraud.
- istvanp 6y ago
  Try this, it's the entire thread in one page: https://threadreaderapp.com/thread/1273690362608078848.html https://threadreaderapp.com/thread/1273690362608078848.html
  - distances 6y ago
    Still doesn't help. It doesn't say at all what actually happened, expect for a vague mention of made-up cash.
  - thaumasiotes 6y ago
    The original link was already the entire thread on one page. The problem we're complaining about is that the thread very clearly isn't intended to say what happened. No effort is made in that direction; there is not even a hint that it was a goal. It's about as appropriate of a recommendation as an unrelated article in National Geographic.
eatbitseveryday 6y ago
> > "Only when the tide goes out you find out who has been swimming naked" - Warren Buffet What does this mean?
- aspenmayer 6y ago
  The emperor’s clothes exist in a super-position of both existing and non-existing. When the tide goes out, this results in the wave function collapse of the super-positional state of the emperor’s clothes, thus demonstrating the observer effect on textile systems. Just a joke. It means that you can’t tell who lost their shirt til all the bubbles are drained from the pool, and we’re left with ourselves, each other, and our new shared reality.
- SideburnsOfDoom 6y ago
  It means that it's easier to cheat when times are good. But when there's an economic downturn (tide goes out, in the metaphor), that's when concealed problems can't be hidden any longer.
- chooseaname 6y ago
  Assuming naked swimmers wouldn't continue to swim as the tide goes out, you would find them laying on the sandy beach with their no-nos hanging out.
  - hef19898 6y ago
    Unless the swimmers are to comfortable in the water to see the tide going out. In which case they are caught with their pants down, well without pants to begin with. The smart swimmers are drinking cocktails by then, courtesy of SoftBank more often than not.
- superhuzza 6y ago
  That it's easy to hide or overlook financial problems in a good market. Once the market is tougher, those problems come to light.
thesumofall 6y ago
> Losers con’t: E&Y – One word: cash. If your audit can’t confirm the cash in the bank, you need to find another business. Full stop. E&Y is the auditor of record in two other major suspected frauds Not sure I get this. The news reports also seem to claim that E&Y rejected to sign the balance sheets. Or was that just after everything went haywire?
- this_user 6y ago
  EY had been WDI's auditor for well over a decade. They only now refused to sign after KPMG wouldn't give the company a clean bill of health in April. Obviously, these shady practices didn't just start in the last few months, so there are clearly things that EY should have flagged much earlier, but failed to do so. And for that, they will be on the hook.
  - thesumofall 6y ago
    Thanks for clarifying. Confusing story if you’re just starting to get into it
thaumasiotes 6y ago
> A very good thread summarizing what happened in this massive fraud: > https://mobile.twitter.com/DonutShorts/status/1273690362608078848 https://mobile.twitter.com/DonutShorts/status/12736903626080... Huh? I read the thread. It calls out a bunch of people who were involved; it doesn't discuss what happened at all.
- deleted 6y ago
  [deleted]

gizmo 6y ago

Wirecard's massive fraud has been documented for over a decade, but the German financial oversight group BAFIN refused to do their job and investigate the fraud claims: https://valueandopportunity.com/2020/06/19/wirecard-the-german-enron-a-very-personal-history-2008-2020/ https://valueandopportunity.com/2020/06/19/wirecard-the-germ... There are some real lessons here about journalism, efficient markets, govt oversight, and truth prevailing in the very long run.

JumpCrisscross 6y ago
Not only that, the German financial regulatory response was to ban short selling of Wirecard’s stock.
- makomk 6y ago
  The German financial regulators also launched a criminal investigation into the journalists investigating and reporting on the fraud: https://www.ft.com/content/8e1948be-6060-11e9-b285-3acd5d43599e https://www.ft.com/content/8e1948be-6060-11e9-b285-3acd5d435... Their handling of this was nothing short of asounding.
  - StreamBright 6y ago
    And some people claim that EU is so much better than the rest of the world in terms of governments and legislation.
  - phkahler 6y ago
    Oh my. I thought Germany was a shining star in the EU, but not any more.
    - usrusr 6y ago
      In finance and fintech, many in Germany like to think of themselves as a bit of an underdog compared to London, New York and so on. This can be a dangerous source of moral licencing.

fabian2k 6y ago

There are 1.9 billion EUR missing, not sure if the implication is that they were stolen or never existed in the first place. I also can't really think of any possible explanation for this to go so far when the banks in question say that the account never existed at all. It doesn't seem believable that anyone seriously investigated the potential fraud in the last months or years, and the scandal has been public for a while now.

jansan 6y ago
You cannot believe how sophisticated fraud can be. There was an amazing fraud scheme in Germany in the 1990s by a company called FlowTex. Their business was selling drilling machines for the oil and gas industry. The amazing part about the fraud was that they sold 3000 drilling machines, but only about 300 actually existed. You would think it should be easy to simply count the existing drilling machines, but they changed the serial number plates and presented the same machines over and over again to investors and auditors. Just unbelievable that this worked for a few years.
- mtmail 6y ago
  https://en.wikipedia.org/wiki/FlowTex https://en.wikipedia.org/wiki/FlowTex Saw a documentary with the founder the other day, served 7 of a 12 year prison sentence.
  - tibbydudeza 6y ago
    Interesting here is a documentary on this https://www.youtube.com/watch?v=fQ5m0Gv-xKM https://www.youtube.com/watch?v=fQ5m0Gv-xKM
  - netsharc 6y ago
    It makes me wonder if a life of white collar crime is worth it... Before MEGA, Kim Dotcom was someone who took investor money and spent it lavishly (his website had a lot of photos of luxury cars, villas and parties), skimming his Wikipedia, it says he only got a suspended sentences from the German courts...

sneeze-slayer 6y ago

NPR's Invisibilia did a really interesting show/podcast on one of the biggest short sellers of Wirecard and how he has been harassed for the past few years. I highly recommend people listen to if if they are interested in this crazy Wirecard tale! It's titled "Trust Fall" https://www.npr.org/transcripts/868001948 https://www.npr.org/transcripts/868001948

MR4D 6y ago
Chilling! That would scare the heck out of me.
empath75 6y ago
“Never threaten to cost someone more than it would cost to have you killed.” is a reasonable rule to live by.
- dbuder 6y ago
  Coward.
- gspr 6y ago
  That seems like a rule that would have a terrifying chilling effect on a lot of legitimate lawsuits.
  - raducu 6y ago
    Luckily a lot of people live in the civilized world, where the high likelihood of being caught and prosecuted for murder and spending a lot of time in jail, make murder a not so reasonable option -- assuming we are talking about psychopaths willing to kill someone for financial gain. Murder is nowadays an option for few criminal organizations -- such as the USA government, the British Royal House (remember, Epstein didn't kill himself), the Russian Government or the mafia or some drug gangs.
    - tbonepickens 6y ago
      "remember, Epstein didn't kill himself" - citation needed I get that Epstein's death was fishy, I myself very much think so, but "Epstein didn't kill himself" isn't a factual statement because there still lies a possibility that he took his own life

easytiger 6y ago

Slightly awkward tweet from him: > We are overachievers. Wirecard’s business is going strong into the future and we are very much looking forward to a successful year. https://mobile.twitter.com/_MarkusBraun/status/1228257269567119361 https://mobile.twitter.com/_MarkusBraun/status/1228257269567...

pieterhg 6y ago
Old tweet
- easytiger 6y ago
  Feb this year. Not old.
  - umeshunni 6y ago
    Well, he said pretty much the same thing today: https://mobile.twitter.com/_MarkusBraun/status/1273974132531658754 https://mobile.twitter.com/_MarkusBraun/status/1273974132531...

adventured 6y ago

And there's Masayoshi Son and SoftBank, plowing $1 billion into Wirecard a year ago, for a 5.6% stake. Mr. Enabler seems to have secured a prime seat for many of the big frauds & scandals in tech from the past few years. At this point regulators should just be tracking SoftBank to watch where they've stuffed the Saudi money (or in this case, it's a very unusual UAE & SoftBank financing arrangement). Bloomberg story out right now: "The meltdown at Wirecard AG is raising questions about the company’s complicated relationship with the troubled SoftBank Group Corp." http://archive.is/ipWck http://archive.is/ipWck

easytiger 6y ago
My favourite SoftBank investment was the automated pizza van thing. I can only hope SoftBank had shares in a failing robotics company that it needed to funnel money to
- Danieru 6y ago
  The pizza van guy was active here on hacker news right? I remember seeing posts from a robot pizza guy. Shame they got caught up with softbank.
  - easytiger 6y ago
    I don't think being caught up with SoftBank is the issue. More that SoftBank have a subset of very negative indicators in their selection process
    - Nasrudith 6y ago
      It seems that lack of a remotely viable businesses model and trying to scale things that don't are are common SoftBank flaws. Like WeWork and the countless scooter and ride share at a loss companies with little true barrier to entry and can hardly pay for themselves while infamously underpaying their workforce.
- mtmail 6y ago

jansan 6y ago

Anyone remember L&H, the famous computer translation company that went bankrupt in 2001? At one point they had a whopping market capitalization of almost 10 billion US$! IIRC they also claimed that a large sum of money somehow got missing in Asia (South Korea I think). But given that the management actually went to jail, it seems the fraud actually originated in their headquaters in Belgium.

easytiger 6y ago
I didn't when you wrote L&H, but on searching and finding it was https://en.m.wikipedia.org/wiki/Lernout_%26_Hauspie https://en.m.wikipedia.org/wiki/Lernout_%26_Hauspie I do indeed remember them and their software.
- aashu_dwivedi 6y ago
  I didn't remember them by name but after reading the wikipedia page, I remember they are the company which acquired Drangon systems in liu of a large number of stocks.
  - weinzierl 6y ago
    If I remember the story correctly the founders of Dragon Systems sued the bank that handled the acquisition. They claimed the bank convinced them to take stock and not cash at a point in time when the same bank already had been preparing for the inevitable bankruptcy of L&H. They lost because M&A was considered a different branch of the bank and not supposed to know about the imminent bankruptcy. BTW: The founders of Dragon Systems are a married couple with an interesting bio too.

ckastner 6y ago

As I mentioned in another submitted story: SoftBank really knows how to pick them. It invested 1 billion about a year ago [1]. [1] https://www.bloomberg.com/news/articles/2019-04-23/softbank-.. https://www.bloomberg.com/news/articles/2019-04-23/softbank-....

jansan 6y ago
But not directly. WSJ wrote "Funding came from personal accounts of a group of SoftBank employees and an outside investor." Doesn't make it better, does it?
- lazyjones 6y ago
  Who knows whether that investment actually happened at this point...
- koheripbal 6y ago
  It's definitely better for SoftBank.
samizdis 6y ago
Got a file not found with the link above, but this [1] is a few hours ago: "SoftBank Support for Wirecard Under Scrutiny After Meltdown" [1] https://www.msn.com/en-us/finance/companies/softbank-support-for-wirecard-under-scrutiny-after-meltdown/ar-BB15HWDO https://www.msn.com/en-us/finance/companies/softbank-support...
- grumple 6y ago
  Do we consider a softbank investment to be a red flag at this point?
koheripbal 6y ago
corrected link: https://www.bloomberg.com/news/articles/2019-04-23/softbank-is-said-to-consider-acquiring-5-stake-in-wirecard https://www.bloomberg.com/news/articles/2019-04-23/softbank-...

deleted 6y ago

[deleted]

LatteLazy 6y ago

We really do need some process where by the accounts of large companies are reconciled with reality. I understand completely that this is not possible for all the numbers investors want to see (Profit is made up after all). But there should be a requirement to report certain hard numbers (cash revenues and cash held for instance) that should be audited and correct to the penny on a given day. If a business claims to have received 1m $/£/E in cash sales, they should be able to show their accountant credit transactions for that amount and 0.1% of those should be checked by calling the customer and confirming they paid the money. The same applies for cash on hand on a historic day. Nothing will make fraud impossible, but right now it's just so easy...

eigenvalue 6y ago
They basically do this now (or are supposed to) but only once a year for the annual audit. It gets complicated when you have related party transactions, where separate private companies that are secretly controlled by the CEO can claim that they owe money to the main company. Eventually these things get found out, like in this case, but by then a lot of investors can lose their money.
withinthreshold 6y ago
Which is exactly the usual audit procedure - a sample of account balances and turnover is tested (i.e., confirmed) with the counterparty as part of testing.

x87678r 6y ago

2 Billion? Isn't that just a regular burn rate for a fintech startup? I'll assume this company just gets some funding then continues on its way.

s_dev 6y ago
Who's gonna fund a company that just exposed itself as having fraudulent accounting?
- nikanj 6y ago
  SoftBank

tex0 6y ago

Can someone please explain to me how 1.9B can go missing? I'm probably too naive, but I really don't how that much money can get "lost".

H8crilA 6y ago
It was never there.
weinzierl 6y ago
Bloomberg article from yesterday[1] phrased it as "[..] auditors couldn’t find about 1.9 billion euros ($2.1 billion) in cash [..]" and "[..] were unable to find accounts [..]" I, too, was wondering what to think. How can I imagine to be unable to find an account? [1] https://www.bloomberg.com/news/articles/2020-06-18/wirecard-drops-in-early-trading-before-delayed-financial-results https://www.bloomberg.com/news/articles/2020-06-18/wirecard-...
- jansan 6y ago
  As I understand it Wirecard had a written confirmation by two Phillipine banks that there is 2 biion in desposits. E&Y got suspicious, because the confirmations arrived really fast, much faster thank banks usually take to issue these papers. So they sent a guy in the Phillipines to the banks to investigate. The banks claimed that there are no deposits and the documents were issues by an employee without authorization.
x87678r 6y ago
Acquiring Chinese companies will do that.
anotheryou 6y ago
The proof was bank statements about 2 accounts on philipinian banks. Those where bad fakes as E+Y noticed: - arrived to early (usually takes month) - issued in € not $ after calling up one of the banks: - 2/3 signatures fake - 3rd signature by a person not authorized to sign it So someone definitely made these statements up in a criminal act. This account does not belong to wirecard directly, but to a trustee or something, which seems to be a normal practice. So in theory he could have stolen the money. However even the choice of this lawyer is fishy, he specializes in family law... More fishy stuff know even last year: https://www.ft.com/content/cd12395e-4fb7-11e9-b401-8d9ef1626294 https://www.ft.com/content/cd12395e-4fb7-11e9-b401-8d9ef1626...

baxtr 6y ago

It’s a shame that this company is part of the DAX, Germany’s large cap index of its 30 largest companies. I hope they get expelled soon

H8crilA 6y ago
They already are, their participation drives down with the market cap :D On a more serious note - Merkel will have to do some serious firing and locking up in prison. At least I hope she does that, if not frauds will only multiply.
- corty 6y ago
  Merkels party CDU is very much the political arm of the corrupt old boys network. E.g. her former minister of finance, now head of the Bundestag, Schäuble, was deeply involved in a corruption scandal. Currently that same network seems to rear its head in the Amthor scandal. Therefore I doubt very much that a lot of firing and locking up will happen, just some token amount with a sprinkling of shuffling positions and failing upwards...

Mordan 6y ago

Someone explain to me why MS was forced to allow competing browsers and today Apple forces you to use their own browser engine? Isn't that a double standard?

ubermonkey 6y ago
I mean, I can, but this is probably the wrong thread. You're also slightly off about "allowing" competing browsers. MS never limited other browsers in Windows; you were always free to download another (and there were others). It just gave IE an absurd inside track by including it FREE with Windows and making it the default, which was hugely damaging to Netscape (which, at the time, was charging money for a browser; yes, this sounds bananas today). This was a textbook example of monopolistic behavior, since at the time Microsoft OWNED computing. There wasn't another viable platform. The Mac was, at the time, circling the drain. Desktop Linux didn't exist. If you wanted a computer, you ran Windows, full stop. MSFT was leveraging their enormous monopoly power to give them a monopoly in another market (browsers), and that's a big anti-trust no-no. Apple has nowhere near that kind of market power. The iPhone is a minority player in a huge market -- much bigger than the PC market Microsoft dominated in the 90s. Android holds a majority position there. This means Apple doesn't have a monopoly. You can, and people do, buy something else that allows you do configure basically whatever you want. Apple isn't distorting or damaging the phone/mobile market with their behavior, as MSFT was. Apple definitely DOES have enormous influence and power in mobile computing. That's very true. But because they are a minority player, they don't control the market. And so there's no real legal argument on antitrust grounds to compel them to do anything differently.
- rrdharan 6y ago
  Desktop Linux definitely did exist. I distinctly remember running Slackware with a pirated AccelX server in fall 1997 and messing around with Red Hat (first released in 1995) around that time. The lawsuit was filed in 1998 and arguments were in 2000/2001.
  - ubermonkey 6y ago

noneeeed 6y ago

Can anyone recommend a good overview read of this whole thing? I seem to have missed it all.

fluffything 6y ago
There is none yet, but there is enough material for a Netflix mini-series.

6510 6y ago

Centralization and scale are amazingly efficient but when things go wrong it similarly scales all the way. But hey, at least it wasn't 2.3 trillion this time.

pythonwizz 6y ago

Wirecard has been accused before of fraud by so called "short sellers". The document published (2 years ago?) showed a tremendous, extraordinary complex network of international corporations. Such complex setups have a very limited purpose. It can basically be only tax "optimization", hide fraud or hide ownership (UBO). After having seen this PDF I would not touch the Wirecard stock. By the way, I think Alibaba is opening two new corporations. Per day. You may also want to read at Bronte Capital about Alibaba.

boldslogan 6y ago
Can you remember any keywords to find that pdf or link with the multiple company set up about this? Thanks for the alibaba tip.
- pythonwizz 6y ago
  No I dont. Wirecard went very aggressively against the accusations. The discussion board where it was discussed removed the link since Wirecard were suing everybody. Could have been this one, but I am not sure. Just peaked into it and did not see the page with all the interrelated companies. https://www.scribd.com/document/301557004/Wirecard-pdf https://www.scribd.com/document/301557004/Wirecard-pdf

lazyjones 6y ago

What a strange situation. WireCard immediately looked dubious when I did some research about it last year (as a regular stock investor) and I often stumbled over opinions like this one https://www.deraktionaer.de/artikel/aktien/markus-krall-lufthansa-oder-wirecard-halte-mich-an-warren-buffett-20202608.html https://www.deraktionaer.de/artikel/aktien/markus-krall-luft... (German, sorry) where somewhat reputable people said they would never consider investing into WireCard, without giving a specific reason. The business model of a payment provider is straightforward and ought to be hard to get completely wrong, "what's there to be afraid of that nobody wants to speak about?", I was wondering. In hindsight it's like everybody knew or had a gut feeling something was fishy but decided not to talk about it.

miohtama 6y ago

Wirecard is issuer of most crypto debit cards https://cointelegraph-com.cdn.ampproject.org/c/s/cointelegraph.com/news/major-crypto-debit-card-issuer-reportedly-missing-21b-in-cash/amp https://cointelegraph-com.cdn.ampproject.org/c/s/cointelegra...

everybodyknows 6y ago

As reported by the German press: https://m.dw.com/en/wirecard-ceo-markus-braun-resigns/a-53870101 https://m.dw.com/en/wirecard-ceo-markus-braun-resigns/a-5387...

deleted 6y ago

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dang 6y ago

Not much recent HN discussion on this. Some here: https://news.ycombinator.com/item?id=23438323 https://news.ycombinator.com/item?id=23438323. But this, from a year ago, reads interestingly now: https://news.ycombinator.com/item?id=19737344 https://news.ycombinator.com/item?id=19737344.

dmix 6y ago
Looks like the fraud was even worse than what last year's FT investigation was suggesting. Originally it was just a few million transferred between multiple subsidiaries to fake sales figures to meet quarterly projections. Now actually "losing" billions of dollars sounds much worse. I guess where there's smoke there's often fire.

deleted 6y ago

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actuator 6y ago

The article didn't have more details on it but it seems like EY didn't sign off on accounts after KPMG report indicated fraud. Shouldn't the blame lie on EY as well, as they failed in their job as an auditor, shouldn't they have been the ones to found as they had all the internal info while auditing.

knlam 6y ago

Sorry for my ignorance, according to the source, Wirecard hired KPMG last year to conduct an independent audit to address allegations by FT. Why would anyone who run the fraud hired an auditor to expose their fraud? Do they think they can get away with it? Why not just ignore the allegations?

plerpin 6y ago

Ah, crypto and fraud, peas in a pod.

andi999 6y ago

When people think about a billion dollar exit for a startup founder, not exactly this picture comes up :-)