9 ms·

A very good thread summarizing what happened in this massive fraud: https://mobile.twitter.com/DonutShorts/status/1273690362608078848 https://mobile.twitter.co

• 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]