13 ms·

Former Wirecard CEO Markus Braun arrested

185 points by kleiba 6y ago

matsche 6y ago
it baffles me that it had to come this far. There were warning signs all over it. The German BaFin messed up so badly that one must either fundamentally doubt theircompetence or question their integrity.
- MrBuddyCasino 6y ago
  At least BaFin boss Felix Hufeld admitted they messed up and that the whole thing was the biggest debacle he ever witnessed. This is rare, and I find it respectable. But yeah, how they missed that is hard to comprehend.
  - mschuster91 6y ago
    > But yeah, how they missed that is hard to comprehend. Look at the German DAX and what is in there. That is explanation enough. Heavy industry, consumer goods, banks, insurances. The only IT company other than Wirecard is SAP and it is not exactly known for innovation. Everyone, especially politics, wanted Wirecard to succeed: the only actually somewhat innovative IT company in the DAX. It's the same pattern with the car industry scandals (not just Dieselgate but also the Porsche attempted takeover) or with Bayer/Monsanto. Germany doesn't have many "unicorns" so politics will protect them until way too late, for the companies, for the share/stakeholders and the planet.
    - djpr 6y ago
      > Germany doesn't have many "unicorns" so politics will protect them until way too late, for the companies, for the share/stakeholders and the planet. Interesting. Is there a strong feeling of innovation/unicorn envy among the wider business culture in Germany? Is it a fear of being stale, comparisons to Silicon Valley & Asian tech scene, or something else? I'm curious if you have more insight on this?
      - mschuster91 6y ago
        > Is there a strong feeling of innovation/unicorn envy among the wider business culture in Germany? Everyone wants to be like the SV hipsters, no one can because the higher-ups are still mentally and literally stuck in fax times, there is almost no venture capital (and the venture capital that is here gets invested into stuff like Rocket Internet whose "business model" is to copycat US ideas), banks (across the EU) won't dish out dumb money because unlike the US we have public funded pension systems and not capital-based ones and we have strict loan regulations (Basel framework). > Is it a fear of being stale Culturally, us Germans are known for being extremely risk-averse, bankruptcies are socially shamed. This of course clashes with the US way of life that from the bottom to the top embodies "fail fast", and the youth yearns for change but as explained above that's hard to do.
        sushshshsh 6y ago
        May I also additionally ask how on Earth a 50k salary for a software engineer is at all justified? After paying taxes and rent, it seems to me there is not much money left over for saving or lifestyle spending? It seems like an unfair situation
        jlangenauer 6y ago
        Why is it unfair? No-one is forcing anyone to accept development work for 50k per year, yet there are plenty of people happy to do it.
        sushshshsh 6y ago
        Define plenty? It seems to me the other commenters have offered counter points to you. In the US, before taxes, an income of $130,000 to $170,000 is the norm in bigger cities. I imagine based on my calculations that the difference between Berlin's discretionary income for SWE and NY/SF/SEA/BOS is probably an extra $50,000 post tax.
        6y ago
    - dmix 6y ago
      Or most of the major fraud happened outside of Germany [1] and like most ponzis/frauds they can seem entirely legitimate on the surface until all the tail ends start becoming shorter and there's no Peters left to pay Paul. Plus they seemed to have had a legitimate primary business, more than enough to cover their pump & dumping in foreign countries without strong rule of law. There are always limitations on how much regulators and law enforcement can do and it always seems obvious in retrospect. There's always more that could have been done. [1] the prior accusations by FT in 2019 mentioned it was their foreign subsidiaries inflating sales figures and recently the money got 'lost' hit a dead end in Asia. Companies often get plenty of time to pay back debts and billion dollar companies are given the benefit of the doubt they can pay it back...
      - detaro 6y ago
        Bafin went further than "not paying attention/not having access" though. When Financial Times published articles last year questioning Wirecards accounts, Bafin banned shorts on Wirecard temporarily and asked prosecutors to investigate the journalists for market manipulation, in parallel to looking into Wirecard. That's a bad look when it seems they were right.
        TheOtherHobbes 6y ago
        FT have been on WC's case from 2015, looking at various associated accounts dated as far back as 2011. The 2019 article was the killer, with one of Wirecard's financial partners traced to the home of a baffled fisherman in the Philippines. IMO it's hard not to wonder if there's a story behind the story. "Oh dear we at BaFin really didn't notice" just doesn't seem at credible, even if you include some toxic politics.
      - celloductor 6y ago
        like they say- if you owe the bank 100k, or even a million dollars, then it's your problem. But if you owe the bank 100 million dollars... then it's their problem.
    - ManuelKiessling 6y ago
      > Look at the German DAX and what is in there. That is explanation enough. This, by definition, cannot be an explanation, because what's in the DAX and what's not is based solely on the numbers of the listed companies. See https://de.wikipedia.org/wiki/DAX#Auswahlkriterien https://de.wikipedia.org/wiki/DAX#Auswahlkriterien
    - xchaotic 6y ago
      As one person in Germany explained to me - there is no corruption at the low level - it is not worth it for the policeman to lose a nice salary and a pension for a few hundred euros bribe. So you will get a speeding ticket everytime and Germany is known for that sort of 'solidity'. On the higher end, however, the stakes and balances are different - high pay is frowned upon and owners of Aldi supermarkets etc are known for their frugality and driving second hand cars. So if one wants to make big money - it needs to be under the radar, possibly illegal and bribes for big infra projects are common.
      - woodpanel 6y ago
        I'd would rather say: a) Incompetence instead of curruption. Plus b) trust culture as entry-vector. a) It has been bemoaned on many instances regarding Germans and finance: We're just inapt when it comes to knowledge about finance. Teachers unions fight tooth and nail to keep finance and business acumen out of the curriculum. This (itself being rooted in culture) will have to bear fruit in some way or another. Eg. Germany has the lowest share of people invested in equities of all industrialized nations. Even with negative interest rates, people rather use savings accounts than "risky" products with yields above 2%. And then there is real estate… So it is no wonder to me that a state-agency is even easier fooled than E&Y was. Afterall (regarding leaked chats of Eno Kurniawan), they internally boasted about "brainwashing" the E&Y guys. b) after all, what short-cuts our lack of understanding most of the time, is that we assume there is no wrong doing in the first place. So Markus Braun, claiming everything is fine until the very last minute seemed plausible. Even after the news broke on Thursday it seemed plausible for many, that the wrong doing was on the side of some Philippinian actors only.
        mschuster91 6y ago
        > Eg. Germany has the lowest share of people invested in equities of all industrialized nations. Even with negative interest rates, people rather use savings accounts than "risky" products with yields above 2% That is mostly to be blamed on savings accounts being decent in interest until the 2008 financial crisis while at the same time, especially in the dotcom boom, a lot of money was destroyed in the stock markets. The "Volksaktie", today known as Telekom (yes, this Telekom, for the US folks), wiped out a lot of people's savings and they remembered this.
  - neximo64 6y ago
    How would you find it respectable that the BaFin leader basically describes it as if he's a spectator, even after? The arrest is one thing, it would be interesting to see if there's jail time. The other executives responsible haven't even been fired and just shuffled around Wirecard.
  - rasz 6y ago
    witnessed or personally ran?
  - ulfw 6y ago
    It's Neuer Markt all over again. This fuck-uppery was the same twenty years ago. I don't think they have learned a thing since.
  - hef19898 6y ago
    Yeah, he did admit that. Difficult not to. Bafin would look a lot better, IMHO, if in addition to investigate the FT and British short sellers, they also had a closer look at WC. They didn't.
    - bilbo0s 6y ago
      It's worse than that, they did look at WC, and found nothing out of order.
    - com 6y ago
      The most terrible thing is that Bafin or their successor organisation will contain nearly all the current managerial cadre, but will have grown by 5 times in the coming 4 years. Nothing will change except for more chauffeur-driven BMWs. Never waste a good crisis.
      - muro 6y ago
        What risk do they have in not doing their job? Approximately none.
- synaesthesisx 6y ago
  Agreed - there were glaring red flags since as early as 2008. Here's an account from one of the earliest critics: 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... The fact that something this obviously fraudulent dragged on for over a decade is nuts.
  - riffraff 6y ago
    Don't forget their auditors who have seen nothing wrong for ten years.
    - neuronic 6y ago
      Mention their name. It's Ernst & Young.
    - kyrra 6y ago
      I think you are over-estimating what an auditor is expected to do. Auditor's, to me, seem to be there to make sure you're compliant with the law or regulation that they are auditing for. In these audits, the company gathers and presents all of the data that the auditors will see. The auditors will do interviews with people, but the company also (somewhat) picks who will get interviewed. Remember that auditors are paid for by the company they are auditing. They are motivated to do the minimum required to pass the given regulation. They aren't there for true oversight, they are there to make sure all the checkboxes are checked.
      - saberdancer 6y ago
        Yes, but the understanding is that the auditor gives approval of your "books" and companies should not be able to function for years while doing fraudulent things. This is why there is audit in the first place. It is mandatory and they should be held accountable for it.
        kyrra 6y ago
- celloductor 6y ago
  unfortunately it is common in the country as big companies or party donor often get "protection" from the govt despite their failings. Deutsch Bank and Volkswagen for example. Big scandal (globally) but at home they merely got a slap on the wrist.
- mjd 6y ago
  Matt Levine, who writes the “Money Stuff" column for Bloomberg News, described it like this: > When a company is going around accusing reporters of conspiring with short sellers to bring it down, that is an almost infallible sign that it is going down. Companies that are not doing fraud, when reporters ask if they have faked their revenue, respond by explaining where their revenue comes from. Companies that are doing fraud, when reporters ask if they have faked their revenue, call the police to try to get reporters arrested. > The news about Wirecard, now, is sort of trivial; anyone who read McCrum’s reporting and knew the almost-infallible rules of short-selling conspiracy theories already knew that Wirecard was faking its revenue. The bigger implications of the news are for BaFin, which focused on protecting Wirecard from speculators when in fact the speculators needed protection from Wirecard. https://www.bloomberg.com/opinion/articles/2020-06-22/the-best-fraud-is-in-plain-sight https://www.bloomberg.com/opinion/articles/2020-06-22/the-be...
  - _curious_ 6y ago
    Really enjoy Levine's stuff, but had to unsub from his newsletter because they are too long for me to keep up with.
    - jiveturkey 6y ago
      and here we witness the death of journalism
      - _curious_ 6y ago
        I guess we all have our limits? Just wish the newsletter was more concise with the opp to dig deeper...found that just reading a segment at times drags on and gets interrupted/ incomplete. A better approach would be to either pull a single paragraph from the full length piece, a TLDR type summary conclusion of the broader thought and hyperlink that clip to the expanded/full content on Bloomberg's site. This would result in my stayed subscription to the (truncated) newsletter, a higher open rate, and actual visits to their website (which the newsletter does not drive IMO). Cheers!
- justapassenger 6y ago
  > it baffles me that it had to come this far. There were warning signs all over it. It's not a Germany specific problem. Warning signs all over tons of companies. Most of silicon valley darlings are plastered with red flags all over. But financial regulators like SEC are unable/not willing to take an action against darlings of wall street.
  - pkaye 6y ago
    Can you name some?
    - realityking 6y ago
      Theranos is an example from the recent past
geophile 6y ago
I was just listening to a podcast last night, in which a financial analyst who identified problems with Wirecard was harrassed for years, both online and IRL. Interesting story: https://www.npr.org/transcripts/868001948 https://www.npr.org/transcripts/868001948
- saberdancer 6y ago
  It was on HN couple of days ago. Quite interesting even though I expected more info about the fraud in the podcast.
  - mintplant 6y ago
    Invisibilia is more about human factors than business ones.
- tenpies 6y ago
  What's really interesting is seeing the same people sound the same alarms about extremely popular companies that continue to trade today, and yet our regulators, auditors, and journalists all ignore them. We really never learn. If I were a regulator I would be taking short seller statements extremely seriously when it comes from one of the proven reliable ones.
  - deleted 6y ago
    [deleted]
  - greenhatglack 6y ago
    Though I can't speak for regulators and auditors, you have to keep in mind that 99% of journalists are just hired guns who's sights are specified ahead of time. Since no one with power had their sights on Wirecard, nothing happened - it's not unexpected.
    - AndrewBissell 6y ago
      John Carreyrou managed to take down Theranos despite the fact that Elizabeth Holmes appealed directly to the owner of his paper, who sat on her board.
ubermonkey 6y ago
I am coming way late to this story. Is there a good backgrounder on this whole thing?
- programbreeding 6y ago
  I'd recommend this HN post [0] which links to a good background story [1]. It literally starts with "For those who just came back from a 15 year space mission: Wirecard is a German company that..." haha. [0] https://news.ycombinator.com/item?id=23598824 https://news.ycombinator.com/item?id=23598824 [1] 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...
  - TechBro8615 6y ago
    As an anecdotal datapoint, I've never heard of Wirecard until the past few days. Although I'm American and not in finance.
weinzierl 6y ago
Allegedly he will be released on 5 million Euro bail at 5 pm CET.
xoxoy 6y ago
The same people with large shorts in Wirecard like Chanos also have large shorts in Tesla. Just saying.
- simonebrunozzi 6y ago
  Maybe because these people like to short stuff?
- tracker1 6y ago
  Tesla is probably over-valued, but not every over-valued company fails. Some (amazon, tesla, google) eventually back-fill value into their bubbles. IMHO it really comes down to how solid the business and its' operations are as a whole. As long as they aren't mis-spending any excess capital in horrible ways, they can definitely do well. Of course, I prefer to see more conservative approaches to growth and expenditures but that's nearly impossible with a car company.
  - stu2b50 6y ago
    If those companies eventually backfilled value, then they weren't overvalued. Investors just, and correctly so, valued growth over immediate revenue. Of course, growth oriented companies fall flat on their face plenty of times, but for your Amazon's and Google's, with hindsight I don't think you can call them overvalued with the information we have now.
- adventured 6y ago
  Chanos, the guy sitting on a bearish call against Tesla in November. The stock is up 200% since then. If Chanos were really betting to match his propaganda, he'd never work again after being destroyed like that.
  - xoxoy 6y ago
    Wirecard has been at highs too. That’s the point. If you have high conviction something is wrong then it doesn’t matter that it works the wrong way in the meantime.
Apofis 6y ago
So did the steal the money like Nissan's ex-CEO or just spent over a decade lying about the company's financials? The latter seems incredibly retarded; To what end? It's a job.
- eigenvalue 6y ago
  The latter. Basically the missing $2b of cash equals the sum total of all the net income the company claimed to have earned over its entire history (which was the basis for its $27b market cap at its peak). As for why, who knows, they probably would have gone under during the financial crisis in 2008 and lost their jobs if they hadn’t cooked the books. Then once you start doing that you’re on a treadmill to keep it going, similar to the Madoff fraud. And in the meantime, the CEO gets to be the big man of the German tech scene and enjoy the perks of being a billionaire on paper. It must have been pretty stressful though, that’s for sure! These kind of people have some way of compartmentalizing things so they can function on a day to day basis.
  - TheOtherHobbes 6y ago
    In 2020, I'd be willing to short any company whose CEO sports a black turtleneck.
ww520 6y ago
And yet the stock went up 18% this morning. It’s really baffling.
dang 6y ago
Recent threads: https://news.ycombinator.com/item?id=23573386 https://news.ycombinator.com/item?id=23573386 https://news.ycombinator.com/item?id=23598824 https://news.ycombinator.com/item?id=23598824 https://news.ycombinator.com/item?id=23438323 https://news.ycombinator.com/item?id=23438323 This, from a year ago, reads interestingly now: https://news.ycombinator.com/item?id=19737344 https://news.ycombinator.com/item?id=19737344

185 points by kleiba 6y ago

it baffles me that it had to come this far. There were warning signs all over it. The German BaFin messed up so badly that one must either fundamentally doubt theircompetence or question their integrity.

MrBuddyCasino 6y ago
At least BaFin boss Felix Hufeld admitted they messed up and that the whole thing was the biggest debacle he ever witnessed. This is rare, and I find it respectable. But yeah, how they missed that is hard to comprehend.
- mschuster91 6y ago
  > But yeah, how they missed that is hard to comprehend. Look at the German DAX and what is in there. That is explanation enough. Heavy industry, consumer goods, banks, insurances. The only IT company other than Wirecard is SAP and it is not exactly known for innovation. Everyone, especially politics, wanted Wirecard to succeed: the only actually somewhat innovative IT company in the DAX. It's the same pattern with the car industry scandals (not just Dieselgate but also the Porsche attempted takeover) or with Bayer/Monsanto. Germany doesn't have many "unicorns" so politics will protect them until way too late, for the companies, for the share/stakeholders and the planet.
  - djpr 6y ago
    > Germany doesn't have many "unicorns" so politics will protect them until way too late, for the companies, for the share/stakeholders and the planet. Interesting. Is there a strong feeling of innovation/unicorn envy among the wider business culture in Germany? Is it a fear of being stale, comparisons to Silicon Valley & Asian tech scene, or something else? I'm curious if you have more insight on this?
    - mschuster91 6y ago
      > Is there a strong feeling of innovation/unicorn envy among the wider business culture in Germany? Everyone wants to be like the SV hipsters, no one can because the higher-ups are still mentally and literally stuck in fax times, there is almost no venture capital (and the venture capital that is here gets invested into stuff like Rocket Internet whose "business model" is to copycat US ideas), banks (across the EU) won't dish out dumb money because unlike the US we have public funded pension systems and not capital-based ones and we have strict loan regulations (Basel framework). > Is it a fear of being stale Culturally, us Germans are known for being extremely risk-averse, bankruptcies are socially shamed. This of course clashes with the US way of life that from the bottom to the top embodies "fail fast", and the youth yearns for change but as explained above that's hard to do.
      - sushshshsh 6y ago
        May I also additionally ask how on Earth a 50k salary for a software engineer is at all justified? After paying taxes and rent, it seems to me there is not much money left over for saving or lifestyle spending? It seems like an unfair situation
        jlangenauer 6y ago
        Why is it unfair? No-one is forcing anyone to accept development work for 50k per year, yet there are plenty of people happy to do it.
        sushshshsh 6y ago
        Define plenty? It seems to me the other commenters have offered counter points to you. In the US, before taxes, an income of $130,000 to $170,000 is the norm in bigger cities. I imagine based on my calculations that the difference between Berlin's discretionary income for SWE and NY/SF/SEA/BOS is probably an extra $50,000 post tax.
        6y ago
  - dmix 6y ago
    Or most of the major fraud happened outside of Germany [1] and like most ponzis/frauds they can seem entirely legitimate on the surface until all the tail ends start becoming shorter and there's no Peters left to pay Paul. Plus they seemed to have had a legitimate primary business, more than enough to cover their pump & dumping in foreign countries without strong rule of law. There are always limitations on how much regulators and law enforcement can do and it always seems obvious in retrospect. There's always more that could have been done. [1] the prior accusations by FT in 2019 mentioned it was their foreign subsidiaries inflating sales figures and recently the money got 'lost' hit a dead end in Asia. Companies often get plenty of time to pay back debts and billion dollar companies are given the benefit of the doubt they can pay it back...
    - detaro 6y ago
      Bafin went further than "not paying attention/not having access" though. When Financial Times published articles last year questioning Wirecards accounts, Bafin banned shorts on Wirecard temporarily and asked prosecutors to investigate the journalists for market manipulation, in parallel to looking into Wirecard. That's a bad look when it seems they were right.
      - TheOtherHobbes 6y ago
        FT have been on WC's case from 2015, looking at various associated accounts dated as far back as 2011. The 2019 article was the killer, with one of Wirecard's financial partners traced to the home of a baffled fisherman in the Philippines. IMO it's hard not to wonder if there's a story behind the story. "Oh dear we at BaFin really didn't notice" just doesn't seem at credible, even if you include some toxic politics.
    - celloductor 6y ago
      like they say- if you owe the bank 100k, or even a million dollars, then it's your problem. But if you owe the bank 100 million dollars... then it's their problem.
  - ManuelKiessling 6y ago
    > Look at the German DAX and what is in there. That is explanation enough. This, by definition, cannot be an explanation, because what's in the DAX and what's not is based solely on the numbers of the listed companies. See https://de.wikipedia.org/wiki/DAX#Auswahlkriterien https://de.wikipedia.org/wiki/DAX#Auswahlkriterien
  - xchaotic 6y ago
    As one person in Germany explained to me - there is no corruption at the low level - it is not worth it for the policeman to lose a nice salary and a pension for a few hundred euros bribe. So you will get a speeding ticket everytime and Germany is known for that sort of 'solidity'. On the higher end, however, the stakes and balances are different - high pay is frowned upon and owners of Aldi supermarkets etc are known for their frugality and driving second hand cars. So if one wants to make big money - it needs to be under the radar, possibly illegal and bribes for big infra projects are common.
    - woodpanel 6y ago
      I'd would rather say: a) Incompetence instead of curruption. Plus b) trust culture as entry-vector. a) It has been bemoaned on many instances regarding Germans and finance: We're just inapt when it comes to knowledge about finance. Teachers unions fight tooth and nail to keep finance and business acumen out of the curriculum. This (itself being rooted in culture) will have to bear fruit in some way or another. Eg. Germany has the lowest share of people invested in equities of all industrialized nations. Even with negative interest rates, people rather use savings accounts than "risky" products with yields above 2%. And then there is real estate… So it is no wonder to me that a state-agency is even easier fooled than E&Y was. Afterall (regarding leaked chats of Eno Kurniawan), they internally boasted about "brainwashing" the E&Y guys. b) after all, what short-cuts our lack of understanding most of the time, is that we assume there is no wrong doing in the first place. So Markus Braun, claiming everything is fine until the very last minute seemed plausible. Even after the news broke on Thursday it seemed plausible for many, that the wrong doing was on the side of some Philippinian actors only.
      - mschuster91 6y ago
        > Eg. Germany has the lowest share of people invested in equities of all industrialized nations. Even with negative interest rates, people rather use savings accounts than "risky" products with yields above 2% That is mostly to be blamed on savings accounts being decent in interest until the 2008 financial crisis while at the same time, especially in the dotcom boom, a lot of money was destroyed in the stock markets. The "Volksaktie", today known as Telekom (yes, this Telekom, for the US folks), wiped out a lot of people's savings and they remembered this.
- neximo64 6y ago
  How would you find it respectable that the BaFin leader basically describes it as if he's a spectator, even after? The arrest is one thing, it would be interesting to see if there's jail time. The other executives responsible haven't even been fired and just shuffled around Wirecard.
- rasz 6y ago
  witnessed or personally ran?
- ulfw 6y ago
  It's Neuer Markt all over again. This fuck-uppery was the same twenty years ago. I don't think they have learned a thing since.
- hef19898 6y ago
  Yeah, he did admit that. Difficult not to. Bafin would look a lot better, IMHO, if in addition to investigate the FT and British short sellers, they also had a closer look at WC. They didn't.
  - bilbo0s 6y ago
    It's worse than that, they did look at WC, and found nothing out of order.
  - com 6y ago
    The most terrible thing is that Bafin or their successor organisation will contain nearly all the current managerial cadre, but will have grown by 5 times in the coming 4 years. Nothing will change except for more chauffeur-driven BMWs. Never waste a good crisis.
    - muro 6y ago
      What risk do they have in not doing their job? Approximately none.
synaesthesisx 6y ago
Agreed - there were glaring red flags since as early as 2008. Here's an account from one of the earliest critics: 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... The fact that something this obviously fraudulent dragged on for over a decade is nuts.
- riffraff 6y ago
  Don't forget their auditors who have seen nothing wrong for ten years.
  - neuronic 6y ago
    Mention their name. It's Ernst & Young.
  - kyrra 6y ago
    I think you are over-estimating what an auditor is expected to do. Auditor's, to me, seem to be there to make sure you're compliant with the law or regulation that they are auditing for. In these audits, the company gathers and presents all of the data that the auditors will see. The auditors will do interviews with people, but the company also (somewhat) picks who will get interviewed. Remember that auditors are paid for by the company they are auditing. They are motivated to do the minimum required to pass the given regulation. They aren't there for true oversight, they are there to make sure all the checkboxes are checked.
    - saberdancer 6y ago
      Yes, but the understanding is that the auditor gives approval of your "books" and companies should not be able to function for years while doing fraudulent things. This is why there is audit in the first place. It is mandatory and they should be held accountable for it.
      - kyrra 6y ago
celloductor 6y ago
unfortunately it is common in the country as big companies or party donor often get "protection" from the govt despite their failings. Deutsch Bank and Volkswagen for example. Big scandal (globally) but at home they merely got a slap on the wrist.
mjd 6y ago
Matt Levine, who writes the “Money Stuff" column for Bloomberg News, described it like this: > When a company is going around accusing reporters of conspiring with short sellers to bring it down, that is an almost infallible sign that it is going down. Companies that are not doing fraud, when reporters ask if they have faked their revenue, respond by explaining where their revenue comes from. Companies that are doing fraud, when reporters ask if they have faked their revenue, call the police to try to get reporters arrested. > The news about Wirecard, now, is sort of trivial; anyone who read McCrum’s reporting and knew the almost-infallible rules of short-selling conspiracy theories already knew that Wirecard was faking its revenue. The bigger implications of the news are for BaFin, which focused on protecting Wirecard from speculators when in fact the speculators needed protection from Wirecard. https://www.bloomberg.com/opinion/articles/2020-06-22/the-best-fraud-is-in-plain-sight https://www.bloomberg.com/opinion/articles/2020-06-22/the-be...
- _curious_ 6y ago
  Really enjoy Levine's stuff, but had to unsub from his newsletter because they are too long for me to keep up with.
  - jiveturkey 6y ago
    and here we witness the death of journalism
    - _curious_ 6y ago
      I guess we all have our limits? Just wish the newsletter was more concise with the opp to dig deeper...found that just reading a segment at times drags on and gets interrupted/ incomplete. A better approach would be to either pull a single paragraph from the full length piece, a TLDR type summary conclusion of the broader thought and hyperlink that clip to the expanded/full content on Bloomberg's site. This would result in my stayed subscription to the (truncated) newsletter, a higher open rate, and actual visits to their website (which the newsletter does not drive IMO). Cheers!
justapassenger 6y ago
> it baffles me that it had to come this far. There were warning signs all over it. It's not a Germany specific problem. Warning signs all over tons of companies. Most of silicon valley darlings are plastered with red flags all over. But financial regulators like SEC are unable/not willing to take an action against darlings of wall street.
- pkaye 6y ago
  Can you name some?
  - realityking 6y ago
    Theranos is an example from the recent past

geophile 6y ago

I was just listening to a podcast last night, in which a financial analyst who identified problems with Wirecard was harrassed for years, both online and IRL. Interesting story: https://www.npr.org/transcripts/868001948 https://www.npr.org/transcripts/868001948

saberdancer 6y ago
It was on HN couple of days ago. Quite interesting even though I expected more info about the fraud in the podcast.
- mintplant 6y ago
  Invisibilia is more about human factors than business ones.
tenpies 6y ago
What's really interesting is seeing the same people sound the same alarms about extremely popular companies that continue to trade today, and yet our regulators, auditors, and journalists all ignore them. We really never learn. If I were a regulator I would be taking short seller statements extremely seriously when it comes from one of the proven reliable ones.
- deleted 6y ago
  [deleted]
- greenhatglack 6y ago
  Though I can't speak for regulators and auditors, you have to keep in mind that 99% of journalists are just hired guns who's sights are specified ahead of time. Since no one with power had their sights on Wirecard, nothing happened - it's not unexpected.
  - AndrewBissell 6y ago
    John Carreyrou managed to take down Theranos despite the fact that Elizabeth Holmes appealed directly to the owner of his paper, who sat on her board.

ubermonkey 6y ago

I am coming way late to this story. Is there a good backgrounder on this whole thing?

programbreeding 6y ago
I'd recommend this HN post [0] which links to a good background story [1]. It literally starts with "For those who just came back from a 15 year space mission: Wirecard is a German company that..." haha. [0] https://news.ycombinator.com/item?id=23598824 https://news.ycombinator.com/item?id=23598824 [1] 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...
- TechBro8615 6y ago
  As an anecdotal datapoint, I've never heard of Wirecard until the past few days. Although I'm American and not in finance.

weinzierl 6y ago

Allegedly he will be released on 5 million Euro bail at 5 pm CET.

xoxoy 6y ago

The same people with large shorts in Wirecard like Chanos also have large shorts in Tesla. Just saying.

simonebrunozzi 6y ago
Maybe because these people like to short stuff?
tracker1 6y ago
Tesla is probably over-valued, but not every over-valued company fails. Some (amazon, tesla, google) eventually back-fill value into their bubbles. IMHO it really comes down to how solid the business and its' operations are as a whole. As long as they aren't mis-spending any excess capital in horrible ways, they can definitely do well. Of course, I prefer to see more conservative approaches to growth and expenditures but that's nearly impossible with a car company.
- stu2b50 6y ago
  If those companies eventually backfilled value, then they weren't overvalued. Investors just, and correctly so, valued growth over immediate revenue. Of course, growth oriented companies fall flat on their face plenty of times, but for your Amazon's and Google's, with hindsight I don't think you can call them overvalued with the information we have now.
adventured 6y ago
Chanos, the guy sitting on a bearish call against Tesla in November. The stock is up 200% since then. If Chanos were really betting to match his propaganda, he'd never work again after being destroyed like that.
- xoxoy 6y ago
  Wirecard has been at highs too. That’s the point. If you have high conviction something is wrong then it doesn’t matter that it works the wrong way in the meantime.

Apofis 6y ago

So did the steal the money like Nissan's ex-CEO or just spent over a decade lying about the company's financials? The latter seems incredibly retarded; To what end? It's a job.

eigenvalue 6y ago
The latter. Basically the missing $2b of cash equals the sum total of all the net income the company claimed to have earned over its entire history (which was the basis for its $27b market cap at its peak). As for why, who knows, they probably would have gone under during the financial crisis in 2008 and lost their jobs if they hadn’t cooked the books. Then once you start doing that you’re on a treadmill to keep it going, similar to the Madoff fraud. And in the meantime, the CEO gets to be the big man of the German tech scene and enjoy the perks of being a billionaire on paper. It must have been pretty stressful though, that’s for sure! These kind of people have some way of compartmentalizing things so they can function on a day to day basis.
- TheOtherHobbes 6y ago
  In 2020, I'd be willing to short any company whose CEO sports a black turtleneck.

ww520 6y ago

And yet the stock went up 18% this morning. It’s really baffling.

dang 6y ago

Recent threads: https://news.ycombinator.com/item?id=23573386 https://news.ycombinator.com/item?id=23573386 https://news.ycombinator.com/item?id=23598824 https://news.ycombinator.com/item?id=23598824 https://news.ycombinator.com/item?id=23438323 https://news.ycombinator.com/item?id=23438323 This, from a year ago, reads interestingly now: https://news.ycombinator.com/item?id=19737344 https://news.ycombinator.com/item?id=19737344