Anatomy of a Scandal: Inside the Wirecard Investigation

[Music] well good afternoon everybody why have they led a journalist in here well I think we're talking about risk today and uh my job for the financial times as an investigative reporter well it's not quite risk that's for other people to to decide on my job is truth what is real and what isn't basically it's to stand there and say the emperor has no clothes and that might be useful because there's been a lot of that lately hasn't there crypto for instance FTX and all of that uh and a bunch of other businesses that turned out to be nothing more than air having stolen billions Silicon Valley Bank which went from being one of the best fastest growing banks in the world to no longer really existing which took a lot of people by surprise but not if you have been reading the financial times but what are we talking about today is one of the biggest ones wire card what was Europe's biggest fintech and became Germany's biggest ever accounting Scandal and it was exposed due in large part to the six-year investigation that me and my colleagues undertook to try and get to the truth now I'm going to run through this in the next 13 minutes so I'm just going to give you some highlights and what I'm going to try and do is equip you not with all the details of how to find a fraud that's my job but really what this hinges on is the questions of the truths we choose to recognize the messages we tell ourselves because what this story really is about is when conf conf fronted with new information time and again investors Regulators people who should have known better chose to believe the easy answers rather than the difficult ones so what are we talking about this somewhat gives away the ending I've already done that and uh as we can see whyard got up to almost $30 billion in value and the point I came into the story was was 2014 an investor who knew the sort of thing I was interested in asked me if I'd be interested in some German gangsters and it turned out it was this company called wiard and back then it called itself the European PayPal it's something to do with payments move money around online and it turned out Ian it was worth about4 billion then and it turned out that there were two the theories about wire cards that were circulating among the hedge fund Community because wire card was growing really really fast but it was also really profitable at the same time and that is very hard to do so it created a suspicion that something was up and there were two theories one this is fraud they're simply maky it up the other money laundering wiard had a certain reputation those gangsters I mentioned and the Assumption was that any bit of nasty business online that you might imagine wiard was moving the money for it and as you can see from this chart I wrote a bunch of stories trying to get to the bottom of this and nothing really happened the share price after a while went up and up and up again and why why was that well part of it was thanks to this guy Marcus Brown the chief executive now he started to dress a bit like Steve Jobs the Apple founder because he adopted the pose of the tech Visionary and these are the big stories we all love right the green transition crypto big sweeping changes to the world that we can invest in and make a packet and wire cards was the cashless economy don't worry about the details all you need to know is that people are going to stop using notes and coins and we're going to be at the heart of that and people lapped it up because that's what investors are looking for right the next big thing you're not really too worried about the details now why did I see something different well a lot of my job really is apply what I would call cockroach theory if you find one cockroach well there's probably going to be more of them lurking under the fridge aren't there and by cockroaches I mean lies if you find a company lying about one thing chances are it's lying about a whole bunch of other things and in this case the lies were relatively straightforward Ward had bought a whole series of businesses all over Asia but when you looked closely at what was happening on the ground there it just didn't match up with what wireart had claimed what have been telling everybody about these wonderful businesses it was buying so I my job is to look for fraud and I saw pretty quickly this seems pretty fraud you can't use the fword in print you get into all sorts of trouble and I was convinced I mean I spoke to the chief executive and one of the the fun things about being a journalist is you get to ask people some very rude questions so I had asked Marcus Brown that guy in the turtleneck directly are you a crook what's going on here and whilst the words were a little bit angry I mean he did say it's but really his tone was what always stays with me oh I get asked this all the time yes let me explain why I'm not a criminal kind of weird her and he did some things which Liars always do he answered with a question why would I do these things why would I risk my reputation and he invokes outside Authority The Regulators are happy with us the analysts are happy with us we have a top quality accounting firm ernston young auditing our books surely no problem and that's what the market listened to they didn't see cockroaches they saw the next big thing and a whole bunch of other stuff was happening in the background that convinced us these guys were Crooks but we had nothing we could print until something miraculous happened I was sent this in the summer or the Autumn of 2018 wire card had just entered the Dax index of Germany's 30 largest companies and well do not make copies or circulate that's a good stuff right and what had happened was there had been an internal investigation conducted by some of wiard's own lawyers they had found crimes going on in their Asian finance department it was in Singapore and people were doing all sorts of weird little frauds sending money to people they weren't allowed to that sort of thing and so they did a proper investigation produced the this report and when they sent the results to Germany well something strange happened it was the lawyer in charge of it who was forced out and the guy's responsible nothing happened so he did the thing that I'll always be thankful for he became a whistleblower and he gave me the chance to see inside and this was the huge breakthrough because um I mean I always feel bad about telling people this but um when wire card fired him they gave him a choice we can fire you or you can resign and they gave him to the end of the week so the next morning he came in with a hard drive and took copies of everything so finally we could write the story fraud we could put it in print and um my boss has this expression you know you have a big story because you hit print and then you almost throw up well this one had fraud in the headline and pretty quickly 8 billion was knocked off the value of wire card stock you're thinking I really hope this one's right and we realized we had to do more to convince people so we went to go and explore more of wiard's business these files these magic amazing files had allowed us to realize the secret at the heart do remember those two theories the money laundering or the fraud one was the cover for the other internally and externally people inside wiard was told we've got this special business all the payments all the dirty stuff which is too hot to handle for us we'll send it to our friends they'll do the payment processing and send us back a big fat commission and in not quite so explicit terms this was what a lot of investors thought as well they saw the Cockroach they knew about this theory of moneya laundering but they kind of shrugged and said well if The Regulators don't care why should we seems to be quite profitable but we went to go and check it out and we went to the Philippines my colleague knocked on the door and um we found the partner that's their um that's their logo on the left there but you'll notice that there also appears to be a Tor buus company run from the same office and when she went inside there was a lot of evidence of tor buus is being arranged but no sign of international payments processing this is it the Smoking Gun we were convinced but wiard took a different tag it created doubt now this is the other bad guy if you're going to commit a long running accounting fraud you need a kind of James Bond figure or an evil James Bond villain lurking in the background and that's Yan marel this was taken from um this this is a still from a lunch year range with the financial times the premise was that there might be two $10 million available if one of my colleagues could just make these nasty stories go away kind of interesting right who can't you buy for $10 million and what they did is they cooked up a whole alternative story they said the FD reports were fake news that we were corrupt that we were leaking our stories to specul ators this was nothing more than a means to try and manipulate war card share price and regulators and investors bought that we found ourselves under investigation but also they wrot in one of the world's greatest investors in terrible businesses SoftBank came along and offered to L wiard A Billion dollarss so it seemed quite reasonable on the one hand there was room for doubt there are some very important people lined up alongside wiard and maybe the ft is corrupt now things had started to get a little bit scary and we started to realize that this large team of private detectives were following us around that that Bond villain guy Yan marle he was connected to Russian intelligence he had interests in Libyan cement operations he was hanging out with some very nasty people and that was quite scary I mean um let's just say I didn't stand close to the edge of any uh train platforms but there was only one way through it we had to get to the truth so we published the big story in October 2019 everything is fake the sales are fake the prophets are fake here are the documents but wire card continued to exist for another eight months why is that it got the benefit of the doubt it's a company surely a company can't be criminal and this is how frauds get away with it these big complex frauds they try as hard as possible to look like normal businesses they take advantage of the sort of the natural trust we have in society and institutions that surely something of this size could not be hiding in plain site and so they announce an investigation they'll bring in a new accounting firm but eventually well you can fake it for a long time but eventually somebody somewhere is going to ask to see the money and uh well this is what € 1.9 billion EUR looks like a whole bunch of German accountants and lawyers went to the Philippines where wiard said it was keeping its money and they went to the lawyer Studio who was supposedly looking after it um it was fascinating character he mainly gives advice on YouTube about family law you know adultery things like that and this is the guy who wire card had usted with 1.9 billion euros and they go to the banks and they get handed these two pieces of paper and you can see that the banks are take it very seriously the assistant branch manager is in charge of these accounts which you know by the way the branch is on a bit of a low rent street it's sort of between a bicycle repair shop and a garage and eventually the accountant start to get a bit nervous so they ask the bank directly what's going on and the message comes back these accounts are spurious at which point two things happen everybody in Germany has to Google the slightly obscure English word spurious which means they're not real and then well quite quickly wire card goes directly into bankruptcy 20 billion EUR so to zero in the blink of an eye the chief executive is arrested he is currently on trial with two of his conspirators seems like quite a low number doesn't it um several of The Regulators had to resign although the Finance Minister at the time who was in charge of the German regulator um he went on to bigger things um some guy called Olaf Schultz and um and there is a there are more trials ongoing and hopefully we might one day get to the bottom of it but the main guy that Bond villain well he disappeared he got on a private plane and flew to Russia where he's currently hanging out with I don't know Steven sigal and his Russian friends um and so that is the whistle to stops tour of the wire card scandal the message is really it is very hard to change people's minds when there is money at stake uh if you'd like to know more there is an excellent book I highly recommend of course there is the Netflix documentary 90 minutes whizzes by very entertaining great Friday evening entertainment and um if you have questions or you'd like to know more I will be talking in the auditorium upstairs uh with CEO of at 2:15 I think in the auditorium um but in the meantime if anybody sees this guy please do let me know thank you very much for your time