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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.co

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.
      - stickfigure 6y ago
        This varies quite a bit. I was the CTO of a very large porn site in the mid-2000s and our chargeback rate was tiny - a small fraction of a percent. That fact didn't help us avoid high-risk categorization, though.
      - Throwawayaerlei 6y ago
  - 55555 6y ago
    Yeah this is probably a big part of their business. I recently shopped around for a merchant account for a similar market and Wirecard reps were willing to work with me and would allow us to process big numbers.
- 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...

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.
    - stickfigure 6y ago
      This varies quite a bit. I was the CTO of a very large porn site in the mid-2000s and our chargeback rate was tiny - a small fraction of a percent. That fact didn't help us avoid high-risk categorization, though.
    - Throwawayaerlei 6y ago
- 55555 6y ago
  Yeah this is probably a big part of their business. I recently shopped around for a merchant account for a similar market and Wirecard reps were willing to work with me and would allow us to process big numbers.
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...