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Wirecard files for insolvency after financial hole laid bare
- the_mitsuhiko 6y agoThe entire story is shameful. I can just hope the Germans learn lessons from this.
- einrealist 6y agoWhat should I learn from this? That there are fraudulent companies? You make it sound like all Germans are responsible for this.
- thaumasiotes 6y agoThat prosecuting journalists for reporting that a company is fraudulent should, at a minimum, be reserved for after it has been established that the company is not fraudulent.
- matzab 6y agoThe kneejerk insulted reactions to the original FT articles by BaFin and the German business press really haven't been up to par. They need to do a lot better.
- the_mitsuhiko 6y agoI hope at the very least this Beissreflex that every shortseller is evil and should be investigated gets curbed. Wirecard since 2008 was having the support of Bafin of going against journalists and shortsellers who were calling out the company for market manipulation. In Germany shortselling has an incredibly bad reputation. I think this is a problem.
- corty 6y agoThe lessons learned will be "hide your crimes better". And a few token gestures. This kind of crime is just too profitable, and the "little man" will not start any larger protests over it. So there is no desire anywhere in substantial changes.
- roenxi 6y agoBillions of dollars just turned out not to be there. I'm going to throw out a challenge to the idea that the "little man" was the loser here on the basis that little men do not have billions of dollars to lose. Someone bigger than little lost here. If every man, woman and child in Germany chipped in $1,000 that still isn't a billion dollars.
- siegfried-en 6y agoIt'd be around 80 billion dollars, actually
- pgrulich 6y agoI think he confused the us billion (10⁹) with the german billion (10¹²) ;)
- mratsim 6y agoWhat? So what do German use for 10^9, Milliarden? In French we use Milliard for billion and Trilliard for Trillions (and millions for millions).
- siegfried-en 6y ago
- ChuckNorris89 6y ago>I can just hope the Germans learn lessons from this. N'ah! When it comes to big banks, big industry, big infra projects, German state institutions are super corrupt, it makes Wall Street and the City of London look like saints.
- benjaminva 6y agoSources?
- ChuckNorris89 6y agoWirecard, Dieselgate, BER Airport, German gov wireing the whole country with copper instead of fiber because the ministry of infrastructure had connections to the copper business leaving the country's internet behind Ukraine, all Gov IT projects going to SAP or T-Systems with no accountability, etc. Nobody went to jail for any of those and in some cases it was never investigated. If you're on the DAX, you're untouchable in Germany.
- Flockster 6y agoDo you have a source for the copper claim? That is entirely new to me.
- ChuckNorris89 6y agohttps://www.spiegel.de/netzwelt/web/deutschland-warum-unsere-handynetze-so-schlecht-sind-kolumne-a-1297362.html https://www.spiegel.de/netzwelt/web/deutschland-warum-unsere... [Translated from German] Christian Schwarz-Schilling had been Post Minister under Helmut Kohl since 1982 and launched the German mobile phone network at the end of the 1980s. His political understanding of infrastructure can be seen in a disturbing fact: Until a few hours (!) before he was sworn in as Post Minister - Schwarz-Schilling was involved in a copper cable company. He sold his shares to Nixdorf. The company was then "one of the most important newcomers in the cable business". Contrary to most expert advice, Schwarz-Schilling pushed the extensive investment in copper cable instead of fibre optics during his term of office, in other words: politically, he acted entirely in the interests of the buyer of his shares. In any case, exactly 30 years ago, SPIEGEL called the mobile phone licensing for which Schwarz-Schilling was responsible "a festival of lobbyists". The fact that nobody got jailed for this obvious corruption is staggering to me and German politicians dare lecture Southern Europe on corruption.
- baxtr 6y agoI am really unsure if it's something "Germans" need to learn. It is probably something that could happen everywhere...
- smcl 6y agoOne weird thing I have noticed is that in the UK the phrase “The Germans” is often used instead of “Germany” (where it’s grammatically valid, of course) for some reason. It’s really noticeable if you watch British TV coverage of the World Cup or European Championships. Don’t know if the OP is British or living there, but it’s possible that this is what’s happening and they don’t mean “all Germans ...” and just mean “The appropriate body in Germany the country ...
- sgt101 6y agoI think UK English carries the intent that Germany is a physical place - an abstract legal notion. While The Germans are the people who live in this place. The place and notion can't really learn anything, while the people who live there could learn something.
- CydeWeys 6y agoVery common here in the US to do this with all countries. "Germany" is a country, whereas "Germans" are people. So in a sporting context saying something like "The Germans are better at passing the ball" makes more grammatical sense than "Germany is better at passing the ball". Same for the Italians, the French, etc.
- smcl 6y agoIt’s not quite the same actually. You’ll see the commentators occasionally reference Italy/The Italians or France/the French ... but the way they use “The Germans” is on a different level. I also feel like it’s also said with a weird intonation, so not “The Germans” but “The Germans” - with a little snarl :-D I don’t know how to explain it - you’d need to watch a World Cup with BBC and ITV coverage to see it in action. England have a special footballing history with Germany so it may be related to this. Note: not implying this was what the original person meant, this is just a silly tangent :-)
- StreamBright 6y agoWhat lessons exactly? Did they learn anything from the VW scandal?
- StreamBright 6y agoAnother aspect is that the financial auditor responsibility. I am not sure if the financial auditor criminally complicit but I think we are going to figure it out soon.
- yitchelle 6y agoThe Munich prosecutor's office, which is already investigating Braun on suspicion of manipulating Wirecard"s accounts, said "We will now look at all possible criminal offenses." The type of behavior that brought Wirecard down is not a German thing, it is a human thing. We have the ability to think outside the box for profit and greed, and that, sometimes, gets us into trouble.
- joyj2nd 6y agoYeah, like the Americans with Madoff? Who "did not run a hedge fund but provided services to hedge funds"? The SEC had also data provided from professionals that Madoff is either fraud or a ponzi and always ignored it. The sentence above was enough that they did not further investigate him.
- chewz 6y agoAny lessons learned from Dieselgate? Or from Danske Bank laundering 236 bilions Russian money? C'mon this is Europe... We are forgetting quickly here..
- sixhobbits 6y agoAnyone know if Transferwise Global debit cards are impacted by this?
- the_mitsuhiko 6y agoI doubt it will. Wirecard powers too many transactions. It’s going to go into administration and someone is going to pick it up.
- H8crilA 6y agoToo big to fail You realize that they probably have literally zero money?
- the_mitsuhiko 6y agoThat’s irrelevant. They have customers with complex integrations who can’t move. That’s worth a lot of money. Someone will want to acquire that.
- H8crilA 6y agoThat really depends on the level of debt that charges the company. If it's very high you won't get that before the bankruptcy court finishes their job. The fact that you need something doesn't mean you'll get something.
- ricardo81 6y agoI'd tend to believe your take on it. Pulling the rug from all the companies using Wirecard to process payments could cause mayhem. Though when it comes to a buyer, hard to tell how they'll be able to get to a fair valuation given the fairytale numbers they have in their books.
- lowmemcpu 6y ago> Though when it comes to a buyer, hard to tell how they'll be able to get to a fair valuation given the fairytale numbers they have in their books. I always pictured the court auctioning off assets in a firesale to the highest bidder. Is that not how it works?
- fbn79 6y agoNow is clear what the company motto "Beyond payments" means.
- adwf 6y agoDoesn't surprise me in the slightest. Worked for a fintech company a few years back that used Wirecard as the processor for one of their products. Somehow they managed to lose the PK/FK relationship between accounts and transactions (or something like that). A whole lot of our customers suddenly started getting other people's transactions on their accounts. It was the final straw that shutdown the entire product line and we moved on to other providers for new projects. So, not at all surprised they don't know where their money is.
- hef19898 6y agoSo basically the cardinal sin of payment processing then? Not that I'm surprised.
- codegladiator 6y agoI say cardinal sin would have been not storing amounts as integer.
- rudiv 6y agoThere's a cardinal pun somewhere in there but I can't think of it.
- jojobas 6y ago... but I can't place it.
- messe 6y agoThis would be a top tier joke if only we could rank it.
- salawat 6y agoBird, position in the Catholic hierarchy, countability, or direction wise? Something to do with using floats to indicate cardinality briefly plummeted, but was summarily dismissed. Regardless, losing track of the numbers to accounts reminded me of this one place I worked where the transaction geese weren't recorded as explicit callouts on the transaction ledger, but rather had to be cross-referenced with final transaction amounts and the fee configuration for time period, but where the changing of fee configurations were not tracked with a granularity sufficient for resolving all ambiguity come audit time. And I thought that was bad.
- jdblair 6y agoInvisibilia just released a great podcast about trust, based on the experience of a trader who was harassed by Wirecard. The trader, who was shorting Wirecard, was subject to surveillance, and a constant stream of phishing attacks. https://www.npr.org/2020/06/02/868001948/trust-fall https://www.npr.org/2020/06/02/868001948/trust-fall
- TekMol 6y agoWell, the first half of it was a podcast about that trader. Then it abruptly shifts into ... I don't know what. A general talk about trust or something. It left me confused and unsatisfied.
- dharmab 6y agoInvisibilia is a podcast about emotions. The second half is fairly typical episode.
- hi41 6y agoMany episodes of Invisibilia deal with similar topics as Hidden Brain. I find Hisden Brain better and think Invisibilia should be merged. I don’t like Invisibilia that much because it a lot about feelings and the talk is so much that I cannot grasp the main point of the discussion.
- odiroot 6y agoI'm not sure this podcast is so great. It's a self-promotional piece that takes ages to convey any information and get to the point. I regret listening to it.
- mattm 6y agoI just listened to it this morning when it came up in my feed. I had added this episode after it was mentioned in a previous HN thread about Wirecard. I guess the short seller was proven right.
- oh_sigh 6y ago
- TekMol 6y agoTrade on shares in the company was suspended What does this mean? Is a certain stock exchange not executing trades anymore? Are all exchanges worldwide in sync not executing trades? If so, how is the sync achieved? If it only was suspended at the Frankfurt stock exchange which is mentioned in the article, it would be interesting to see how it is doing at other exchanges. Google is still showing realtime Frankfurt prices. Currently at a market cap of about €350M. And what is the reason behind that? Is it guaranteed that shares of a company that files for insolvency are worth 0? And therefore the exchanges want to save uninformed investors from buying them?
- jussij 6y ago> What does this mean? Since the company has filed for insolvency the shares can no longer be traded. > Is it guaranteed that shares of a company that files for insolvency are worth 0? When a company files for insolvency it means the companies total liabilities are greater than the total assets. And when this happens the company is handed over to a liquidator and they then decide how to handle the companies future. What the liquidator normally does is try to sell the company or parts of the company to other third parties. With the proceeds of that sale they then pay back the debt. Then if any money is left over they split that money between the shareholders. But naturally since the debts are greater than the assets the shareholders will get very little of their original investment back. Since the shareholders are last in the line for the money they tend to lose the most.
- freddie_mercury 6y agoWhat other exchanges are they listed on? It is pretty uncommon for a company to ever list on more than one exchange.
- joyj2nd 6y agoDepends. Very common for non-US Shares (Germany, China, UK etc.)
- freddie_mercury 6y ago
- ivanche 6y agoThis is painful but it's a step in right direction. They have to serve ongoing processes for a couple of more weeks/months. All subsidiaries that can be sold will probably be sold to pay creditors. Hopefully all toxic parts will be removed and a few healthy ones will stay, in one way or another.
- lazylizard 6y agoWill their cards still work?
- simonkafan 6y agoI wonder how many companies in the world are basially built on warm words without any real value behind. I made the experience that a lot of people don't really care if a company has positive revenue streams anymore, they don't even know what a balance sheet is. They simply invest because other people do. And those other people invested because people before them did. This new style "invest billions now in a lossy start up and hope for a positive cashflow in a few years" is absolutely insane, it transformed the economy into a pure gambling hall. What makes it even worse, in case of wirecard, their auditor EY had audited and certified wirecard's balance sheet for years with no objection. They were satisfied with a clumsy fake audit certificate for 2 billion euros in a Philippine account! For how many companies EY did the same? How superficially do they check their customers?
- raesene9 6y agoThe EY point is interesting. I'm not sure if it's still this way, but when I worked there, a lot of care was put on audit clients as the partner(s) signing off the work had effectively unlimited liability, and could lose pretty much all their money in a worst case scenario. Unfortunately audit work, where the company decides on their auditor, has an in-built conflict of interests. If the auditor is too harsh/rigorous, then they risk losing the audit. If they're too lax and miss something material, then they risk lawsuits and regulator attention. Then for large companies there's further complications liket doing the audit may preclude a company from doing other (more lucrative) consultancy work, or that large companies essentially only use one of 4 companies to do their audits, which leads to people rotating through that but little effective competition.
- chosenbreed37 6y ago> The EY point is interesting. I'm not sure if it's still this way, but when I worked there, a lot of care was put on audit clients as the partner(s) signing off the work had effectively unlimited liability, and could lose pretty much all their money in a worst case scenario. Does it ever pan out the way? I'm speaking of the liability on the partners. There have been a number of these in recent times involve pretty much all of the big firms.
- physicsguy 6y agoThis looks really bad for BaFin, they basically treated the Financial Times as criminals for blowing the whistle over the last few years.
- lotsofpulp 6y agoDoes it matter if the corrupt BaFin officials who decided to treat the journalists as criminals are not prosecuted?
- itsoktocry 6y ago>This looks really bad for BaFin, they basically treated the Financial Times as criminals for blowing the whistle over the last few years. It's going on, with a variety of companies, every day. The entire system is beyond corrupt. Regulators are siding with frauds instead of investigating them. A major red flag of corporate fraud is attacking journalists and blaming "short-sellers". Have these entities ever caused the demise of a legitimate company?
- cs702 6y agoA total of around $2B has simply "disappeared" -- as in, no one yet has been able to figure out what happened to it. I keep imagining a Monty Python-esque skit: "Was it stolen? We don't know." "Was it spent? We don't know." "Was it lent? We don't know." "Was it transferred? We don't know." "Was it burned? We don't know." Coincidentally, or maybe not, the company's last fictitious balance sheet, which was published in November of last year, right before the scandal was revealed, reports approximately $2B in long-term debt.[a] So, as much as Wirecard was in the business of processing financial transactions ($124B last year!), it was also secretly performing a magic act of borrowing money and making it disappear into thin air. In a way, it's been an "impressive" performance. On a more serious note, I hope Wirecard's failure is not seen in hindsight as a "Creditanstalt moment."[b] -- [a] https://ir.wirecard.com/download/companies/wirecard/Presentations/WDI_Investor_Presentation_9M2019.pdf https://ir.wirecard.com/download/companies/wirecard/Presenta... [b] The failure of Creditanstalt, an Austrian bank, in 1931, marks the beginning of the Great Depression in Europe: https://www.bis.org/publ/work333.pdf https://www.bis.org/publ/work333.pdf
- rixrax 6y agoHin Leong[0] is about to go the way of wirecard with a ’hole’ of mere $3B USD. I’ll hazard that we’re seeing only the firsts in a wave of [cooked up] companies imploding. [0] https://www.wsj.com/articles/massive-forgery-helped-hide-3-billion-hole-in-energy-traders-books-11592993288 https://www.wsj.com/articles/massive-forgery-helped-hide-3-b...
- hef19898 6y agoCOVID-19, and the accompanying economic down turn has a, hopefully positive, side effect. it exposes all the fault lines, all the cracks and quite a few high level crooks. In business, finance, society. Let's keep fingers crossed that longterm effects aren't too severe.
- baobabKoodaa 6y agoThey never had the money in the first place.
- GrumpyNl 6y agoThis is the second ceo who started to dress like steve jobs and became a fraud.
- WrtCdEvrydy 6y agoThis is an interesting observation... we should catalogue them.
- deleted 6y ago[deleted]
- firethief 6y agoShould we be worried about Xiaomi? https://www.gizchina.com/2011/08/17/xiaomi-ceo-chinas-latest-fake-steve-jobs https://www.gizchina.com/2011/08/17/xiaomi-ceo-chinas-latest... Based on more recent photos, it was just a phase. Maybe the company fixed its issues before it got caught?
- dang 6y agoHere's the rest of the stack so far: https://news.ycombinator.com/item?id=23611347 https://news.ycombinator.com/item?id=23611347 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