In "Money Men," Financial Times journalist Dan McCrum takes us on a thrilling journey through the rise and fall of Wirecard, once hailed as Europe's answer to PayPal. This gripping tale of corporate fraud, investigative journalism, and the power of persistence reveals how a German fintech darling fooled the world and eventually crumbled under the weight of its own deception.
Introduction
In the world of finance and technology, few stories have captivated the public imagination quite like the spectacular collapse of Wirecard. What began as a tip-off to a young, ambitious journalist at the Financial Times would eventually unravel into one of the biggest corporate scandals in European history.
Dan McCrum's "Money Men" provides an insider's account of the decade-long investigation that exposed Wirecard's fraudulent practices. From its shady origins to its meteoric rise and eventual downfall, the book offers a fascinating look at the company's illegal activities, its ability to dodge regulators, and the key information that ultimately led to its demise.
As we delve into this extraordinary story, we'll meet a cast of characters that includes cunning executives, determined whistleblowers, skeptical investors, and a journalist who refused to give up in the face of intimidation and threats. Through it all, we'll witness the power of investigative journalism and the importance of holding corporations accountable.
Chapter 1: Wirecard's Shady Origins
The story of Wirecard begins in 1997 with three ambitious men and a chance encounter on a flight between Munich and Berlin. Paul Bauer-Schlichtegroll, a 40-year-old entrepreneur with a penchant for designer jeans, strikes up a conversation with a photographer for Hustler magazine. This seemingly innocuous meeting sets the stage for Wirecard's controversial beginnings.
Bauer-Schlichtegroll quickly realizes the potential of online pornography and establishes a company to process direct debit payments over dial-up internet. When a competitor goes bankrupt, he acquires it for parts but keeps the name: Wirecard. The company soon expands into another gray area of the internet: online gambling.
At the time, many countries were still grappling with regulations for online gambling, while others had banned it outright. Banks were hesitant to process payments using the online gambling code 7995. Wirecard, however, found creative ways to circumvent these restrictions, first by creating third-party wallets for digital casinos and later by simply swapping the 4-digit code when payments were rejected.
In 2004, Bauer-Schlichtegroll orchestrates a reverse takeover to take Wirecard public, avoiding the scrutiny of a traditional IPO process. As he bows out, two key figures emerge to shape Wirecard's future:
Dr. Markus Braun: Hired as CEO, Braun is an Austrian with a serious demeanor and a fondness for black turtlenecks, reminiscent of Steve Jobs.
Jan Marsalek: One of Wirecard's earliest employees, Marsalek is a confident Austrian hired as Chief Technology Officer in his teens.
However, Marsalek's years of coding an electronic payments system prove fruitless, as the system never actually works. This early setback foreshadows the deception and fraud that would come to define Wirecard's operations in the years ahead.
Chapter 2: The First Signs of Trouble
Fast forward to 2014, and Wirecard's share price has skyrocketed from €4 to €29 in just ten years. The company is now listed on the TecDAX, an index of technology companies on the Frankfurt Stock Exchange. However, not everyone is convinced by Wirecard's success story.
Dan McCrum, now working at the Financial Times, receives a tip about potential irregularities at Wirecard. He meets with Leo Perry, a London hedge fund manager, who shares a stack of evidence he's been collecting against the company. This meeting marks the beginning of McCrum's long and challenging investigation into Wirecard's practices.
Following up on Perry's lead, McCrum travels to Manama, Bahrain, to investigate Ashazi Services, a company that supposedly owes Wirecard €12 million in licensing fees. After a frustrating search through the city's winding streets, McCrum finds a tiny office with no connection to Ashazi. When he finally reaches the company's founder, she denies any involvement with Wirecard's multi-million euro contracts.
Back in London, McCrum and Perry develop a theory: Wirecard is faking its profits and hiding the deception by purchasing fake assets, particularly small companies across Asia. They notice that Wirecard's Asian acquisitions have been growing larger each year, with the company twice borrowing money from shareholders to fund these purchases.
Determined to get answers, McCrum secures an interview with Wirecard CEO Markus Braun. Known for his reclusive nature and alleged fear of flying, Braun rarely makes public appearances. During the interview, Braun attempts to deflect McCrum's questions with vague business jargon and meaningless platitudes.
When McCrum finally asks point-blank if Wirecard is cooking the books, Braun appears deeply offended but notably fails to deny the accusation. This lack of a clear denial only serves to fuel McCrum's suspicions and reinforces his determination to uncover the truth about Wirecard's operations.
Chapter 3: The Zatarra Report and Wirecard's Counterattack
In 2016, the Wirecard investigation takes a dramatic turn with the release of a damning report by Zatarra Research and Investigations. The 100-page document goes beyond mere accounting irregularities, accusing Wirecard of orchestrating a grand money laundering scheme. The report sends Wirecard's shares plummeting, wiping out €1 billion in market value.
McCrum, eager to report on this development, hastily publishes a blog post on the Financial Times website without first consulting the legal team. This decision proves costly, as Wirecard's lawyers soon threaten litigation, accusing the newspaper of colluding with short sellers to drive down the company's stock price.
In a bizarre twist, Wirecard's CTO Jan Marsalek contacts McCrum's editor, Paul Murphy, claiming that a French payments company is planning to acquire Wirecard for double its current value. When the French company vehemently denies this claim, it becomes clear that Marsalek may have been attempting to manipulate the Financial Times into publishing false information to boost Wirecard's share price.
The fallout from the Zatarra report primarily affects McCrum and the Financial Times. For weeks, McCrum lives in a state of paranoia, convinced that his email is being hacked and that he's being followed. Meanwhile, Wirecard seizes the opportunity to paint itself as a victim of malicious short sellers, further muddying the waters and making it harder for McCrum to pursue his investigation.
Adding to the confusion, a fake apology letter circulates, purportedly from a Zatarra employee, admitting to falsifying information. While few believe its authenticity, the letter bears the hallmarks of Jan Marsalek's misdirection tactics.
This chapter highlights the intense pressure and psychological toll that investigative journalists like McCrum face when taking on powerful corporations. It also demonstrates Wirecard's aggressive tactics in discrediting its critics and manipulating public perception.
Chapter 4: The Whistleblower's Struggle
The narrative shifts to introduce Pav Gill, a young lawyer hired as legal counsel at Wirecard's Asia headquarters. Raised by a single mother in Singapore, Gill's strong work ethic and determination make him an ideal candidate to uncover the truth about Wirecard's operations.
Soon after joining the company, Gill notices peculiar financial practices, particularly those overseen by Edo Kurniawan, a 32-year-old Indonesian known for his relentless work ethic. When a member of Kurniawan's team tips Gill off about questionable accounting practices, he begins his own investigation.
Shocked by his findings, Gill reports his concerns to Wirecard's head of compliance in Munich. An external firm is brought in, producing a 31-page report that heavily criticizes Kurniawan's practices. However, Gill is suddenly removed from the investigation and replaced by Jan Marsalek himself. The inquiry is quietly dropped, and Gill soon finds himself out of a job.
Before leaving, Gill manages to secure 70 gigabytes of files and email archives, providing crucial evidence of Wirecard's fraudulent activities. However, his whistleblowing comes at a great personal cost. Gill struggles to find new employment, with job interviews turning into interrogations about his departure from Wirecard. Strange men begin appearing at the apartment he shares with his mother, Evelyn, creating an atmosphere of fear and intimidation.
Frustrated and scared, Evelyn reaches out to Dan McCrum, hoping the journalist can use the information her son has gathered to expose Wirecard's wrongdoings. McCrum sees the potential in Gill's data and begins working on a major story. However, legal concerns force the Financial Times to significantly scale back the article, publishing only a limited piece about Edo Kurniawan's investigation and subsequent promotion.
The stress of the situation takes a severe toll on Evelyn, who collapses outside her building and is diagnosed with a tumor in her lungs. McCrum feels a deep sense of responsibility, worried that Evelyn might not live to see justice served for her son's brave actions.
This chapter underscores the personal sacrifices and risks that whistleblowers and their families often face when exposing corporate wrongdoing. It also highlights the frustration and ethical dilemmas journalists encounter when balancing the public's right to know with legal and editorial constraints.
Chapter 5: Wirecard Fights Back
As McCrum's investigation gains momentum, Wirecard's tactics become increasingly aggressive and bizarre. In January, suspicious individuals are spotted outside the Financial Times office in London, apparently attempting to use a laser microphone to eavesdrop on conversations through the windows.
McCrum's story about Edo Kurniawan causes Wirecard's shares to tumble once again. The company responds with flat denials, while unexpectedly receiving support from Commerzbank and BaFin, the German financial regulator. Both institutions accuse the Financial Times of market manipulation, with BaFin going so far as to ban short selling against Wirecard.
The situation escalates when the Financial Times publishes a second story about Kurniawan, prompting Singapore police to raid Wirecard's Asia headquarters. Meanwhile, whistleblower Pav Gill receives some good news: his mother, Evelyn, is recovering well from surgery to remove the tumor in her lung.
As the investigation continues, another Financial Times reporter travels to Manila to verify the addresses of companies supposedly owing Wirecard millions of euros. The reporter discovers that these addresses belong to ordinary families or businesses completely unaware of their alleged connection to Wirecard.
Just as the Financial Times prepares to publish a story about these phantom offices in Manila, Wirecard's lawyers sue the newspaper. To make matters worse, McCrum learns that BaFin is investigating him for market manipulation, rather than looking into Wirecard's suspicious activities.
Despite these setbacks, McCrum perseveres, meticulously reviewing his research and speaking with sources. His persistence pays off when he stumbles upon a crucial detail in a public spreadsheet listing Wirecard's clients: many of the companies listed had been liquidated years ago. This discovery leads McCrum to a startling conclusion: Wirecard isn't just faking profits; its entire client base is largely fabricated.
This chapter illustrates the lengths to which Wirecard was willing to go to protect its fraudulent operations, including intimidation tactics, legal threats, and attempts to discredit journalists and regulators. It also showcases the resilience and determination required of investigative journalists in the face of such obstacles.
Chapter 6: The House of Cards Collapses
On October 15, 2019, McCrum publishes his most damning article yet: "Suspect Accounting Practices Revealed." The story presents irrefutable evidence of Wirecard's fraudulent activities, including email transcripts of staff discussing the spreadsheet filled with liquidated business partners.
This time, the impact is significant. Investors and regulators can no longer ignore the mounting evidence against Wirecard. Under intense pressure, the company agrees to a special audit by KPMG, which assembles a team of 40 forensic accountants to scrutinize Wirecard's books.
The KPMG audit proves to be a turning point. The auditors face numerous obstacles, including uncooperative staff and chaotic accounting practices. The investigation ultimately focuses on €1.9 billion in cash supposedly held by a third-party trustee.
When KPMG struggles to reach the trustee, Jan Marsalek intervenes, claiming the trustee had changed and that the money is now in Manila. The auditors travel to the Philippines to verify this claim, meeting with a supposed legal expert named Mr. Tolentino, whose credentials appear questionable at best.
The audit team visits two bank branches where the money is allegedly held. The first is a tiny office squeezed between a pet shop and a mechanic, while the second is located in a mall. Both locations seem ill-equipped to handle billions of euros in transactions.
When the KPMG report is finally made public, it is devastating for Wirecard. The audit reveals that the company's core payment processing business is unprofitable, with most of its reported profits coming from three partners in Manila, Dubai, and Singapore. However, KPMG could barely verify a single document from any of these partners.
This final chapter marks the beginning of the end for Wirecard. After years of deception, bullying whistleblowers, intimidating journalists, and lying to shareholders and regulators, the company's house of cards finally collapses.
Conclusion: The Aftermath and Lessons Learned
The fall of Wirecard serves as a cautionary tale about the dangers of unchecked corporate fraud and the importance of rigorous financial oversight. Despite fooling many people for years, Wirecard's downfall ultimately demonstrates the power of persistent investigative journalism and the courage of whistleblowers in exposing corporate wrongdoing.
Key takeaways from the Wirecard scandal include:
The importance of skepticism: Investors, regulators, and the media should maintain a healthy level of skepticism, especially when dealing with companies that seem too good to be true.
The value of investigative journalism: Dan McCrum and his colleagues at the Financial Times played a crucial role in uncovering Wirecard's fraud, highlighting the importance of a free and independent press.
The need for stronger regulatory oversight: The fact that Wirecard was able to operate fraudulently for so long raises questions about the effectiveness of financial regulators and auditing practices.
The courage of whistleblowers: Individuals like Pav Gill risked their careers and personal safety to expose the truth, underscoring the need for stronger whistleblower protections.
The dangers of corporate intimidation: Wirecard's aggressive tactics against journalists and critics demonstrate the need for robust legal protections for those who investigate and report on corporate wrongdoing.
In the aftermath of Wirecard's collapse, the consequences for those involved vary:
- Jan Marsalek, the company's former COO, has gone missing and is currently a fugitive from justice.
- Dr. Markus Braun, the former CEO, maintains his innocence but faces up to 15 years in prison if found guilty of fraud charges.
- Pav Gill, the whistleblower, has resumed his legal career in Bangkok.
- Evelyn Gill, Pav's mother, has recovered from her health scare and continues to live in Singapore.
- Dan McCrum remains a reporter for the Financial Times, having played a pivotal role in exposing one of the biggest financial scandals in European history.
The Wirecard scandal serves as a reminder of the ongoing need for vigilance in the financial world. It highlights the importance of robust regulatory systems, independent audits, and the crucial role that investigative journalism plays in holding powerful corporations accountable.
As we reflect on this extraordinary story, it's clear that the fight against corporate fraud requires the collective efforts of journalists, whistleblowers, regulators, and engaged citizens. Only through such collaborative efforts can we hope to prevent future scandals of this magnitude and maintain the integrity of our financial systems.
The legacy of the Wirecard scandal will likely influence corporate governance, financial regulation, and investigative journalism for years to come. It stands as a testament to the power of truth in the face of seemingly insurmountable odds and the vital importance of those willing to stand up and question the status quo.
In the end, "Money Men" is not just a story about a single company's fraudulent practices. It's a broader narrative about the complex interplay between corporate power, regulatory oversight, and the relentless pursuit of truth. It reminds us that even in a world of high finance and cutting-edge technology, old-fashioned virtues like persistence, courage, and integrity remain our most powerful tools in the fight against corruption and deceit.
As we move forward, the lessons learned from the Wirecard scandal should inform our approach to corporate oversight, financial regulation, and the protection of those who dare to speak truth to power. Only by remaining vigilant and supporting the work of dedicated investigators like Dan McCrum can we hope to prevent future Wirecards and ensure the stability and integrity of our financial systems.