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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

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.
        Tomte 6y ago
        And what do you think do houses cost in Germany, compared to "bigger cities" in America? I know plenty of people in that income range myself who do own houses (or apartments in some cases) and wouldn't think of forgoing their summer vacation in Menorca or Ibiza. "The other commenters" is just one, and he's factually wrong. No matter how much HNers love to pile on, 50k Euros is a respectable income in most parts of Germany. The idea that all software engineering is in Stuttgart, Munich or Berlin is laughable. We have lots and lots of family companies of the so-called "Mittelstand" strewn across the province (but West Germany primarily). Some of those are hidden champions. In towns and regions few Americans will ever have heard of.
    - Barrin92 6y ago
      I'm German and I honestly have the opposite feeling. I participated in "startup culture" for a few years and I want to never touch it again. I think in the German industry itself there is no real fear of staleness because our systems of innovation generally work differently, on occassion there is a media hype cycle about "rising economy X" displacing everyone, but that has been going on since the 80s when the UK's financialisation was everyone's favourite model. I'm glad we didn't follow on that front... well I guess except for Wirecard that is.
    - Pyramus 6y ago
      German here with startup experience abroad. No there isn't - and it baffles and worries me to the same extent. (Many) Germans think of innovation as incremental, and don't realise how much Germany is missing out in terms of disruptive innovation.
    - raxxorrax 6y ago
      There is a profound lack of developers to start. I was in a German startup and it was awesome. Product didn't pan out for the mass market (medical devices) but the few devices we build by hand are now used for studies in clinics. So it wasn't at all wasted. Software sucks though because I wrote it shortly after finishing my studies with negligible experience. But it works at least. I got support from another developer at some point into the project, but finding qualified people was basically impossible. Still, developers are probably mostly active in traditional industries. Manufacturing needs software experts for example, the product isn't necessarily software itself. There are advantages and disadvantages to that. Overall I don't think Germany/EU is friendly for startups. There are grants for some business ideas, but it is mostly older established folk that know the details of successfully getting capital. In general, I think there is a huge fear of being "left behind digitally". Not so much in the industry itself than in politics or on a personal social level. The demographics responsible for implementing digital innovations often speak english and just use international solutions. There is little "local patriotism" in software. Perhaps there is also a strong idealism which lets people get involved in open source instead of creating business models and market digital services. Again, advantages and disadvantages. edit: To the question about the kind of medical devices perhaps in reaction to the "shitty" software I mentioned: medical devices that cannot kill you and were mostly for diagnostic support. It was safe, the software "architecture" was all over the place though.
      - pythonwizz 6y ago
        What kind of medical devices did you build?
        pythonwizz 6y ago
        We are starting to develop a medical device, so if you are interested please provide your contact information.
        raxxorrax 6y ago
        Sorry, I am not available for hire right now. I have some experience with regulated software for medical devices, but any generic developer could learn the regulatory requirements with a little effort. Mostly related to ISO 62304 and in general ISO 13485. The tools to meet regulatory compliance are general tools developers employ in most projects already. The important part is that the development process is formally defined. The device I worked on was classified as IIa. There was a focus on a thorough risk analysis and we ensured mechanism were in place to shut down the device in any case of emergency. I don't want to say what kind of device it was, it had to do with higher frequency ultrasonic sensory.
    - ThePhysicist 6y ago
      I mean SAP has roughly 30 BN € in revenue and according to their marketing more than 70 % of all transactions worldwide run through an SAP system. If that's not a "unicorn" company I really don't know what qualifies. You could of course argue that SAP is quite old already (founded in 1972, soon to be 50 years old), but so is e.g. Intel (founded in 1968). It's true we missed the boat on the second and third waves of IT companies, but there are many unicorns in the manufacturing sector that most people in IT have just never heard of because it's outside of their bubble, these companies often dominate the world market in their respective segments though. For example, do you associate Germany with 3D printing? Probably not. Well, turns out some of the leading companies in industrial 3D printing technology were created here, in 2016 GE for example tried to acquire Germany-based SLM Solutions for 1.4 BN €.
      - mschuster91 6y ago
        SAP is a solid business, but have you used their software? Once? It's atrocious and the developer experience is even worse, ABAP gives me shudders to this day. Not to mention that somehow, whenever a big IT project in government or private industry crashes, SAP seems always to be lurking. SAP is not "modern" in any sense and certainly not "innovative". Unicorn companies generally are both.
        ThePhysicist 6y ago
        It’s enterprise software, so by definition it “sucks” to the average developer due to its complexity and accumulated tech debt. Show me one software tool that has as much functionality as SAP and does not suck by your standards. Unicorns like Slack have better UI/UX because they solve a conceptually much simpler problem. Maybe you could say it’s better to find a large market that can be addressed with a simple tool, but being in a large market with an incredibly complex product also has its benefits. I doubt for example that SAP will be disrupted by a unicorn with better UI because the upfront cost of building the same functionality that SAP offers (and which is not superfluous) is horrendously high. Regarding Slack I can absolutely imagine that it will be disrupted in the near future, because it’s conceptually a much simpler product.
      - 6y ago
    - lazyjones 6y ago
      > Is there a strong feeling of innovation/unicorn envy among the wider business culture in Germany? It's not the business culture that's driving this, it's politics. Germany simply isn't a competitive environment for entrepreneurship anymore with problems in many areas: schools, taxation, immigration (too easy for unqualified workers), legislation. Politics is in denial and desperate for success stories that would prove things aren't so bad.
      - ChuckNorris89 6y ago
        Can you please elaborate how/why immigration is easy for unqualified workers in Germany? I thought the point of immigration is to bring in qualified workers to boost the economy.
  - 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

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.
        Tomte 6y ago
        And what do you think do houses cost in Germany, compared to "bigger cities" in America? I know plenty of people in that income range myself who do own houses (or apartments in some cases) and wouldn't think of forgoing their summer vacation in Menorca or Ibiza. "The other commenters" is just one, and he's factually wrong. No matter how much HNers love to pile on, 50k Euros is a respectable income in most parts of Germany. The idea that all software engineering is in Stuttgart, Munich or Berlin is laughable. We have lots and lots of family companies of the so-called "Mittelstand" strewn across the province (but West Germany primarily). Some of those are hidden champions. In towns and regions few Americans will ever have heard of.
  - Barrin92 6y ago
    I'm German and I honestly have the opposite feeling. I participated in "startup culture" for a few years and I want to never touch it again. I think in the German industry itself there is no real fear of staleness because our systems of innovation generally work differently, on occassion there is a media hype cycle about "rising economy X" displacing everyone, but that has been going on since the 80s when the UK's financialisation was everyone's favourite model. I'm glad we didn't follow on that front... well I guess except for Wirecard that is.
  - Pyramus 6y ago
    German here with startup experience abroad. No there isn't - and it baffles and worries me to the same extent. (Many) Germans think of innovation as incremental, and don't realise how much Germany is missing out in terms of disruptive innovation.
  - raxxorrax 6y ago
    There is a profound lack of developers to start. I was in a German startup and it was awesome. Product didn't pan out for the mass market (medical devices) but the few devices we build by hand are now used for studies in clinics. So it wasn't at all wasted. Software sucks though because I wrote it shortly after finishing my studies with negligible experience. But it works at least. I got support from another developer at some point into the project, but finding qualified people was basically impossible. Still, developers are probably mostly active in traditional industries. Manufacturing needs software experts for example, the product isn't necessarily software itself. There are advantages and disadvantages to that. Overall I don't think Germany/EU is friendly for startups. There are grants for some business ideas, but it is mostly older established folk that know the details of successfully getting capital. In general, I think there is a huge fear of being "left behind digitally". Not so much in the industry itself than in politics or on a personal social level. The demographics responsible for implementing digital innovations often speak english and just use international solutions. There is little "local patriotism" in software. Perhaps there is also a strong idealism which lets people get involved in open source instead of creating business models and market digital services. Again, advantages and disadvantages. edit: To the question about the kind of medical devices perhaps in reaction to the "shitty" software I mentioned: medical devices that cannot kill you and were mostly for diagnostic support. It was safe, the software "architecture" was all over the place though.
    - pythonwizz 6y ago
      What kind of medical devices did you build?
      - pythonwizz 6y ago
        We are starting to develop a medical device, so if you are interested please provide your contact information.
      - raxxorrax 6y ago
        Sorry, I am not available for hire right now. I have some experience with regulated software for medical devices, but any generic developer could learn the regulatory requirements with a little effort. Mostly related to ISO 62304 and in general ISO 13485. The tools to meet regulatory compliance are general tools developers employ in most projects already. The important part is that the development process is formally defined. The device I worked on was classified as IIa. There was a focus on a thorough risk analysis and we ensured mechanism were in place to shut down the device in any case of emergency. I don't want to say what kind of device it was, it had to do with higher frequency ultrasonic sensory.
  - ThePhysicist 6y ago
    I mean SAP has roughly 30 BN € in revenue and according to their marketing more than 70 % of all transactions worldwide run through an SAP system. If that's not a "unicorn" company I really don't know what qualifies. You could of course argue that SAP is quite old already (founded in 1972, soon to be 50 years old), but so is e.g. Intel (founded in 1968). It's true we missed the boat on the second and third waves of IT companies, but there are many unicorns in the manufacturing sector that most people in IT have just never heard of because it's outside of their bubble, these companies often dominate the world market in their respective segments though. For example, do you associate Germany with 3D printing? Probably not. Well, turns out some of the leading companies in industrial 3D printing technology were created here, in 2016 GE for example tried to acquire Germany-based SLM Solutions for 1.4 BN €.
    - mschuster91 6y ago
      SAP is a solid business, but have you used their software? Once? It's atrocious and the developer experience is even worse, ABAP gives me shudders to this day. Not to mention that somehow, whenever a big IT project in government or private industry crashes, SAP seems always to be lurking. SAP is not "modern" in any sense and certainly not "innovative". Unicorn companies generally are both.
      - ThePhysicist 6y ago
        It’s enterprise software, so by definition it “sucks” to the average developer due to its complexity and accumulated tech debt. Show me one software tool that has as much functionality as SAP and does not suck by your standards. Unicorns like Slack have better UI/UX because they solve a conceptually much simpler problem. Maybe you could say it’s better to find a large market that can be addressed with a simple tool, but being in a large market with an incredibly complex product also has its benefits. I doubt for example that SAP will be disrupted by a unicorn with better UI because the upfront cost of building the same functionality that SAP offers (and which is not superfluous) is horrendously high. Regarding Slack I can absolutely imagine that it will be disrupted in the near future, because it’s conceptually a much simpler product.
    - 6y ago
  - lazyjones 6y ago
    > Is there a strong feeling of innovation/unicorn envy among the wider business culture in Germany? It's not the business culture that's driving this, it's politics. Germany simply isn't a competitive environment for entrepreneurship anymore with problems in many areas: schools, taxation, immigration (too easy for unqualified workers), legislation. Politics is in denial and desperate for success stories that would prove things aren't so bad.
    - ChuckNorris89 6y ago
      Can you please elaborate how/why immigration is easy for unqualified workers in Germany? I thought the point of immigration is to bring in qualified workers to boost the economy.
- 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