“How could a company with such a grand reputation be built almost entirely on lies?”
1: Wirecard’s foundation was rooted in controversy and dubious ventures.
Wirecard's history began with shady dealings. Founded in the late '90s by Paul Bauer-Schlichtegroll, the company initially focused on processing payments for online porn and gambling. These industries were rife with legal uncertainties, and major banks were unwilling to handle transactions tied to them. Wirecard, however, thrived in this gray area, finding creative but questionable ways to get payments through.
To bypass banks rejecting gambling transactions, Wirecard rewrote payment codes or funneled money through third-party wallets. Early on, this practice set the tone for how the company would operate—rethinking rules was second nature. Over time, the company expanded its services and rebranded itself as a high-tech trailblazer in Europe’s financial sector.
When Bauer-Schlichtegroll exited the company, new leadership took over. Markus Braun, a Steve Jobs-like figure, became CEO in 2002, while Jan Marsalek joined as Chief Technology Officer. Yet, Marsalek’s coding abilities never delivered a functioning payment system, raising early red flags about the expertise and legitimacy behind Wirecard’s operations.
Examples
- Bauer-Schlichtegroll gave Wirecard its name after purchasing a defunct company undergoing an IPO.
- The founders maneuvered around online gambling bans by changing payment codes.
- Marsalek’s nonfunctional IT system showcased an early pattern of empty promises.
2: The red flags were ignored by many, even in Wirecard’s heyday.
By 2014, Wirecard's share value had skyrocketed, boosting its reach and reputation. Investors compared it to PayPal’s European counterpart. Yet, people like London-based hedge fund manager Leo Perry raised concerns about signs of fraudulent activity. He believed Wirecard’s profits were inflated and its acquisitions were shady.
Journalist Dan McCrum, after speaking with Perry, decided to investigate. While tracing Wirecard’s business dealings, he encountered suspicious entities, like Ashazi Services in Bahrain, which listed millions in transactions yet had no actual operation or employees familiar with Wirecard’s dealings. Despite these findings, CEO Markus Braun dismissed allegations and glossed over concerns with corporate jargon during interviews.
This lack of transparency didn’t faze most regulators, investors, or analysts. The German financial community largely celebrated Wirecard's inclusion in DAX 30, a coveted stock market index, cementing its status as a top-tier company.
Examples
- Wirecard claimed €12 million in licensing fees from Ashazi Services, which had no visible presence.
- Braun's evasiveness in interviews raised suspicions but didn’t discourage investors rallying behind Wirecard.
- The financial world applauded Wirecard instead of questioning inconsistencies in its business model.
3: Wirecard used intimidation tactics against critics and whistleblowers.
In 2016, Wirecard faced its biggest scandal yet when a report revealed widespread money laundering. Instead of acknowledging issues, the company retaliated aggressively. Short sellers who bet against Wirecard were harassed, and whistleblowers lived in fear of retaliation. One such whistleblower, Fraser Perring, reported being threatened in public, making it evident that Wirecard would go to any lengths to protect itself.
Journalist Dan McCrum also became a target. After publishing findings that hinted at Wirecard’s dubious practices, he found himself under constant surveillance. He was worried about his emails being hacked and felt unsafe, going so far as to change his home Wi-Fi password and take security precautions for his family. Wirecard’s reputation for using intimidation as a defensive tactic became widely known.
This culture of fear extended not just to external critics but also internal employees who attempted to call out fraudulent activities. Whistleblowers like Pav Gill, a legal counsel at Wirecard’s Asia operations, experienced severe consequences for their truth-telling.
Examples
- Perring was confronted by intimidating figures outside his child’s school.
- McCrum grew paranoid about being followed or hacked after publishing stories critical of Wirecard.
- Gill swiped 70 gigabytes of emails before leaving Wirecard due to fear and frustration.
4: A whistleblower’s tenacity became instrumental in exposing the fraud.
Pav Gill was working in Wirecard’s legal team when he noticed major discrepancies in financial records. Despite reporting suspicious activities to higher-ups, he quickly realized the company wasn’t interested in accountability. When an external audit flagged issues, Jan Marsalek took over the investigation to quash any further probes.
After being pushed out of the company, Gill took critical evidence with him. His collected data became a vital resource for McCrum as he pieced together the full scope of Wirecard’s deception. Meanwhile, Gill and his mother faced intimidation tactics. Strangers loitered outside their apartment in Singapore, yet Gill kept in touch with McCrum to support his investigation, knowing the stakes were high.
Wirecard’s public denial of allegations and threats against whistleblowers put enormous pressure on individuals like Gill. Nonetheless, Gill’s risk-taking was key to unraveling Wirecard’s fraudulent practices.
Examples
- Gill reported financial discrepancies involving Wirecard’s Asia headquarters and its shady business partner, Edo Kurniawan.
- After whistleblowing, Gill and his mother were harassed, leading to her health worsening from stress.
- Gill provided 70 gigabytes of evidence, proving essential for investigative reporting.
5: Regulators failed, siding with Wirecard against journalists and short sellers.
Wirecard not only fooled the public and investors—it also gained the support of major financial regulators, such as Germany’s BaFin. When McCrum began exposing the company’s problems, BaFin accused him and the Financial Times of market manipulation. At one point, regulators banned short selling of Wirecard stocks to stabilize its value.
Germany’s financial hub was proud of Wirecard as its answer to Silicon Valley, which may explain why regulators were slow to scrutinize the company. Even when external audits or damning reports surfaced, Wirecard continued to receive protection and endorsements from influential bodies, which cast doubts on those questioning the company.
This dereliction of duty by BaFin and similar regulators delayed justice, allowing Wirecard to operate unchecked for years. By the time authorities began serious investigations, much of the damage was already done.
Examples
- BaFin launched an investigation into McCrum instead of Wirecard after his articles were published.
- Regulators accused journalists of conspiring with short sellers rather than addressing Wirecard’s actual crimes.
- BaFin’s short-selling ban protected Wirecard shares amid plummeting stock prices.
6: External audits unraveled Wirecard’s façade.
Despite years of evading consequences, Wirecard was cornered in 2020 when an external audit conducted by KPMG revealed massive gaps in its financial dealings. KPMG struggled initially because Wirecard’s records lacked critical details, delaying the process. The audit exposed €1.9 billion in fake assets supposedly stored in foreign trustee accounts.
When auditors visited Manila to verify these funds, they found hollow offices and dubious representatives. At one point, auditors were handed fabricated documents inside a branch located next to a pet store. This level of absurdity became a telling sign that Wirecard had been faking its profits and customers for years.
The ensuing report confirmed that Wirecard’s core business never generated meaningful revenue, effectively ending the company’s journey. The exposure of fraud led to arrests and the disappearance of Marsalek, closing one chapter while leaving behind unanswered questions.
Examples
- KPMG auditors were redirected to Manila, where trustee accounts could not confirm €1.9 billion.
- A YouTube-divorce lawyer, introduced as a financial trustee, underscored Wirecard’s farcical efforts to mislead.
- Debt-ridden small companies abroad were falsely listed as Wirecard clients.
Takeaways
- Always approach “too good to be true” growth claims with skepticism by looking deeper into company fundamentals.
- Support investigative journalism, as reporters are often the first line of defense against large-scale fraud.
- Demand accountability from regulators to ensure financial oversight is free of bias or favoritism.