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Where Did The Money Go?!

Ever heard of Wirecard? Neither had I, until it became frontpage news for those reading financial news. Why was it on the frontpage, you might ask? Well, it had lost 1.9 billion euros. Not as in, lost it by playing blackjack or the markets, no LOST it. It vanished into thin air. No accountant could account for it. Interesting… Now I know I’m hardly a financial analyst nor journalist. But this stuff is cool! Their market share dropped from €128 (mid April) to €1,28 as of late June (Financieel Dagblad). I’ll admit, it’s not exactly the 1929 crash. But it’s impressive in its own right! So what actually happened?


Well, Wirecard, a German based company led by Mr. Braun, was founded in 1999. It’s a fintech company predominantly focused on software associated with digital payment solutions. Their main clients are predominantly from the online gaming and porn industry, but they have worked with big clients like KLM and IKEA, to just name two, as well. Besides being big in Europe, Wirecard took the leap into the Asian market in 2007. Yes, that is just before the crisis, but that didn’t seem that much of an issue. Investors raved about the German flagship, a country not really known for its well-developed fintech sector. Things were looking progressive. And progressive was good. Thing is, not everyone was that enthusiastic. A lot of people were cautious about the quick growth of Wirecard. A very famous sceptic is Dan McCrum, who keeps warning against illusional growth due to fake payments. Of course, this turned into a dick measuring contest in no time: UK vs. Germany edition, where Wirecard simply accused the allegations to be the inventions of “Anglo-Saxon sharks” (great quote from de Volkskrant).


Besides the mudslinging there was more going on: the BaFin, the German regulatory organ with regards to the market and finance, looked at the mudslinging and (initially) also saw it as an unwarranted attack. As a result, no action was taken. It gets better, it took ten years, just a casual decade, for the accounts from EY (another company down the drain) to actually figure out that 1.9 billion euros, claimed to exist on Philippine bank accounts (didn’t realize the Philippines where the new Cayman islands?!) or having been a form of credit that was still due to come to Wirecard, didn’t actually exist. No joke. The accountants couldn’t figure out where that money was, if it had ever been there, and from where, or through which means, this owed debt would still come to Wirecard. Uh oh… Now why only try to fool one accountant if you can fool multiple? Wirecard hired KPMG to figure it all out. But KPMG was having none of it. They started raising flags, being unable to make sense of the books (I’m sure they understood what was going on here, they just couldn’t make the books match, as you’re supposed to!). This was the final straw: the BaFin stepped up their game and started getting properly involved. I remember, the 5th of June… Not exactly a plot to throw over the government, but it was the day that the tax authorities moved onto Wirecard. It was game over. Braun got fired, and his successor almost immediately admitted to those accounts not existing. No accounts, no money. The German minister of Finance admitted to BaFin’s failure. The German flagship had sunk.


This isn’t exactly the first time this mistake has been made. Germany has run into issues with the 2015 Volkswagen scandal (it was about Diesel, remember?) and the Deutsche Bank doesn’t really get off scot-free either. It’s a bit ironic that Germany is seen as such an economic powerhouse; it has no clue what’s going inside its own damn kitchen where the books are getting cooked. Don’t think it’s just Germany though, similar mistakes have happened in other countries. The Italian firm Parmalat comes to mind. So do Enron (US), Satyam (India) and Ahold (Netherlands). This time round not a fintech firm, but a firm based in dairy production. Slightly different sector, same lack of proper checks. Same result.


From a behavioural science perspective these developments are interesting. Why did this take over a decade to get picked up? How could this have happened? Again?! Were there no signs?! There had been signs. Alarm bells had rung before. Dan McCrum had been shouting from the rooftops for a long time. An article in “het Financieel Dagblad” also gives a quote of Anne Stevenson-Yang, of J Capital. They had also looked into Wirecard, and “couldn’t find a reason why this company had much larger profit margins compared to any other company in the same sector.” Moreover, she stated that the research pointed towards a lot of clientele using Wirecard to launder money coming in from the porn and gambling industry. Yikes. You might be wondering why J Capital was looking into Wirecard to start with: the allegations were getting too intense. So they started their research. And then? Well the results did get published, but the market didn’t respond. Allegations were denied further. The flagship continued sailing. Why? Because it’s a flagship. It’s not the smaller companies that seem to fall, it’s the big ones. The giants. The ones that are argued to be too big to fail. Well, if size is all that matters, just pump it full of “baked air” (Dutch saying) and get big. Which is exactly what Wirecard did. It artificially made itself bigger. 1.9 billion euros bigger to be precise. If it’s as easy as that, I’ll just start calling myself a millionaire from now on. Apparently you don’t really need to have the money to do so. Maybe a holiday to the Philippines will "solidify" my new status!


References (all in Dutch, sorry!) Financieel Dagblad: Val Wirecard toont falen toezichthouder en accountant. Lennart Zandbergen, published 27th of June, 2020. NRC: Waarom greep niemand in bij Wirecard? Jorg Leijten, published 26th of June, 2020.

Volkskrant: Hoe Wirecard, de lieveling van de Duitse economie, ineenstortte toen 2 miljard ‘zoek’ bleek. Sterre Lindhout, published 26th of June, 2020. Access:


Behavioural Science

Personal Finance



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