The rise and fall of Germany’s once-leading payment processor, Wirecard, came as a surprise to almost everyone. For over a decade, the fintech company was lauded by investors and protected by the country’s financial watchdog, who were unknowingly witnessing the biggest financial fraud in their history happen in front of their eyes.
Nevertheless, unmasking the misleading and gruesome illegal practices of Wirecard wasn’t easy. The company’s money laundering and malpractices were investigated by a couple of London-based journalists, alongside a few short-sellers and financiers in Europe and the US, turning them into targets of Wirecard’s obscure associates for years, as the German authorities actually prioritized the protection of the fintech giant.
Stay here to find out more about Wirecard’s billionaire fraud and the years-long, uphill battle to unmask it!
Contents
The Public Downfall
On 22 June 2020, Wirecard publicly recognized that €1.9 billion was missing from their account, a fact which came up after a months-long audit led by two firms. One of those auditors was KPMG, an internationally recognised accounting services company appointed in late 2019 to look into the books of Wirecard, prompted by the controversy the fintech was going through, due to several investigative articles published by the London-based Financial Times.
The admission that not only was Wirecard missing billions, but that the money never existed, took the financial world by storm. Up until then, Wirecard had been deemed a reliable financial company which had maintained its status as Germany’s biggest fintech for several years, but things were actually very dim on the inside.
Wirecard filed for insolvency less than a week after revealing that most of its money assets came from outsourced companies nearly impossible to trace back, yet the books had these figures written down while the accounts were empty. Once the fraud was made public and Wirecard’s years-long schemes to turn down public criticism became evident, the company was over. Some executives disappeared, while others faced jail time, but most people aren’t aware that it took a lot of effort, time, and perseverance to let everyone know about Germany’s biggest fraud.
FT: Wirecard collapses into insolvency under weight of multi-year fraud #TomorrowsPapersToday pic.twitter.com/PkiMYMCw3d
— Neil Henderson (@hendopolis) June 25, 2020
How Everything Started
While there were a lot of players named in the Wirecard fraud, two names from the company stand out over others. The first is Markus Braun, a former financial consultant turned Chief Executive Officer (CEO) of Wirecard in 2002. There’s also Jan Marsalek, Braun’s protégé who took the role of Wirecard’s chief operating officer (COO) in 2010. Both men were big shareholders of the company.
It was Marsalek who appointed executive Oliver Bellenhaus to create shell companies in Asia and the British Isles, resulting in the transfer of millions of euros from Wirecard’s main accounts to companies created with the sole intention of hiding funds and other activities, as reported by The Financial Times. At the same time that these shadowy activities were taking place, many turned a blind eye to a then-recent uncovered case of money laundering in Florida, US, as reported by The New Yorker.
Seeing their stock prices spiral down, Wirecard officially expanded its activities to Asia by buying dozens of small, unknown companies. It was later known that these shell companies served Wirecard to mislead their stockholders about the company’s inflated earnings, making it seem as if the money had been invested instead of having disappeared.
Before The Revelation
Around the time Wirecard was involved in schemes around Asia, journalists and financiers were growing wary of the company’s movements. Two Financial Times journalists named Dan McCrum and Paul Murphy were part of the journal’s division Alphaville, in which they published the article series “House of Wirecard” in 2015, covering McCrum’s thoughts and investigations about the inner workings of Wirecard and their suspicious movements.
Unfortunately, “House Of Wirecard” wasn’t as effective as McCrum and Murphy assumed, leading people to lose the point of the information, according to The New Yorker. The articles served Wirecard to paint itself as a victim of misleading and ill-intended journalism, and the fact that a damning but anonymous paper entitled Zatarra Report came out with inaccuracies at the time.
As the Financial Times’ Alphaville moved to uncover information about Wirecard’s activities, the giant shielded behind Germany’s Federal Financial Supervisory Authority (BaFin), which went after the journal for affecting Wirecard with their allegations. This was deemed as dangerous by the BaFin, as the entity considered Wirecard’s role in Germany’s economy too important not to be protected.
However, the investigations led by McCrum and his fellows didn’t go unnoticed by Jan Marsalek, who in 2019 accused The Financial Times of involving itself with short sellers.
Journalism & Targeting
By 2019, it was evident that going after Wirecard wasn’t a smart move for journalists and short sellers. Not only was BaFin protecting Wirecard, and public prosecutors turning their backs on Financial Times’ journalists, but the situation was dimmer than it seemed.
According to Dan McCrum, he discovered that there was an undercover operation targeting him and other journalists at the Financial Times, and short sellers. The previous accusations by Jan Marsalek about a link between both sides were part of a strategy which sought to discredit the accusations against Wirecard.
As The New Yorker reported in 2023, Marsalek was strongly tied to the Russian state and oa Libyan former intelligence agent. Around that time, McCrum found out that an operation to incriminate him in a drug scandal was almost in the works, yet his motivation to prove Wirecard’s shadowy operations was stronger than his desire to give up.
In the end, McCrum and his collaborator’s hard work paid off. After publishing his article “Wirecard’s problem partners” in March 2019 and submitting himself to the investigation that followed, Wirecard reached the end of its long string of lies. Late that year, the accounting firms EY and KPMG led audits on the fintech, and revealed their results the following year, with both concluding their inability to trace €1.9 billion on Wirecard’s accounts.
Aftermath
While the downfall of Wirecard had been a long time coming, charging the people responsible for the fraud committed by the company hasn’t been easy. For one part, Oliver Bellenhaus, who also served as the company’s Dubai branch, was detained by authorities for his involvement in the fraud. Eventually, he accused Marsalek of being the mastermind behind the shell-company strategy led by Wirecard for almost a decade.
On his part, former CEO Markus Braun was detained in 2022 for his involvement with the company, though he’s maintained that he didn’t commit any wrongdoing, and the trial is still ongoing. Nonetheless, shortly after the Wirecard scandal was made public, Marsalek disappeared somewhere in Russia, and is now one of the most wanted men on Interpol’s list.
On the bright side, McCrum and his Financial Times collaborators have been praised for their relentless fight for the truth. On top of that, German financial regulators admitted their negligence over Wirecard’s case, and a reform of the BanFin agency was set in 2021.
All in all, the Wirecard fraud scandal evidences that big companies’ suspicious moves are often overlooked, but also that there’s always someone willing to reveal the truth, at any cost.
