
Wirecard files for insolvency after financial hole laid bare - denzil_correa
https://www.dw.com/en/wirecard-files-for-insolvency-after-financial-hole-laid-bare/a-53936447
======
simonkafan
I wonder how many companies in the world are basially built on warm words
without any real value behind. I made the experience that a lot of people
don't really care if a company has positive revenue streams anymore, they
don't even know what a balance sheet is. They simply invest because other
people do. And those other people invested because people before them did.
This new style "invest billions now in a lossy start up and hope for a
positive cashflow in a few years" is absolutely insane, it transformed the
economy into a pure gambling hall.

What makes it even worse, in case of wirecard, their auditor EY had audited
and certified wirecard's balance sheet for years with no objection. They were
satisfied with a clumsy fake audit certificate for 2 billion euros in a
Philippine account! For how many companies EY did the same? How superficially
do they check their customers?

~~~
raesene9
The EY point is interesting. I'm not sure if it's still this way, but when I
worked there, a lot of care was put on audit clients as the partner(s) signing
off the work had effectively unlimited liability, and could lose pretty much
all their money in a worst case scenario.

Unfortunately audit work, where the company decides on their auditor, has an
in-built conflict of interests. If the auditor is too harsh/rigorous, then
they risk losing the audit. If they're too lax and miss something material,
then they risk lawsuits and regulator attention.

Then for large companies there's further complications liket doing the audit
may preclude a company from doing other (more lucrative) consultancy work, or
that large companies essentially only use one of 4 companies to do their
audits, which leads to people rotating through that but little effective
competition.

~~~
codegladiator
> If the auditor is too harsh/rigorous, then they risk losing the audit

How is this a thing ?

~~~
srhngpr
Because it is an absolute race to the bottom (on price) when it comes to Big 4
audit. There is really no distinction or difference in services provided
between the firms. You can practically switch from EY to one of the other
three (if they don't mind excluding themselves from consulting work)
overnight.

Disclaimer: work for Big 4 but in tech consulting, not audit.

~~~
sukilot
OTOH it was the Big 5 until Arthur Anderson gave up its license due to the
Enron fraud.

So there's an incentive to audit correctly.

~~~
firethief
There's the same kind of incentive not to be the closest moth to the
lightbulb, and yet....

The race-to-the-bottom/die-at-the-bottom reward structure only prevents
disaster if the racers are invested for the long term. The agents in charge
will have a high tolerance for that kind of risk if they hope to retire/sell
before the money train jumps the tracks. I don't know if that's a hazard this
industry is currently falling into, but it's a likely failure mode if nothing
sufficiently enforces agents taking a long view.

------
adwf
Doesn't surprise me in the slightest.

Worked for a fintech company a few years back that used Wirecard as the
processor for one of their products. Somehow they managed to lose the PK/FK
relationship between accounts and transactions (or something like that). A
whole lot of our customers suddenly started getting other people's
transactions on their accounts. It was the final straw that shutdown the
entire product line and we moved on to other providers for new projects.

So, not at all surprised they don't know where their money is.

~~~
hef19898
So basically the cardinal sin of payment processing then? Not that I'm
surprised.

~~~
codegladiator
I say cardinal sin would have been not storing amounts as integer.

~~~
billman
Just curious, how would you manage bitcoin fractional shares.

~~~
deevolution
Bitcoins are represented as integers. A whole Bitcoin is 100MM satoshis.

Typedef int64_t CAmount;

Static const CAmount COIN = 100000000;

Static const CAmount MAX_MONEY = 21000000 * COIN;

[https://github.com/bitcoin/bitcoin/tree/master/src/amount.h](https://github.com/bitcoin/bitcoin/tree/master/src/amount.h)

------
cs702
A total of around $2B has simply "disappeared" \-- as in, no one yet has been
able to figure out what happened to it.

I keep imagining a Monty Python-esque skit:

 _" Was it stolen? We don't know."

"Was it spent? We don't know."

"Was it lent? We don't know."

"Was it transferred? We don't know."

"Was it burned? We don't know."_

Coincidentally, or maybe not, the company's last fictitious balance sheet,
which was published in November of last year, right before the scandal was
revealed, reports approximately $2B in long-term debt.[a]

So, as much as Wirecard was in the business of processing financial
transactions ($124B last year!), it was also secretly performing a magic act
of borrowing money and making it disappear into thin air. In a way, it's been
an "impressive" performance.

On a more serious note, I hope Wirecard's failure is not seen in hindsight as
a "Creditanstalt moment."[b]

\--

[a]
[https://ir.wirecard.com/download/companies/wirecard/Presenta...](https://ir.wirecard.com/download/companies/wirecard/Presentations/WDI_Investor_Presentation_9M2019.pdf)

[b] The failure of Creditanstalt, an Austrian bank, in 1931, marks the
beginning of the Great Depression in Europe:
[https://www.bis.org/publ/work333.pdf](https://www.bis.org/publ/work333.pdf)

~~~
rixrax
Hin Leong[0] is about to go the way of wirecard with a ’hole’ of mere $3B USD.

I’ll hazard that we’re seeing only the firsts in a wave of [cooked up]
companies imploding.

[0] [https://www.wsj.com/articles/massive-forgery-helped-
hide-3-b...](https://www.wsj.com/articles/massive-forgery-helped-
hide-3-billion-hole-in-energy-traders-books-11592993288)

~~~
hef19898
COVID-19, and the accompanying economic down turn has a, hopefully positive,
side effect. it exposes all the fault lines, all the cracks and quite a few
high level crooks. In business, finance, society. Let's keep fingers crossed
that longterm effects aren't too severe.

------
dang
Here's the rest of the stack so far:

[https://news.ycombinator.com/item?id=23611347](https://news.ycombinator.com/item?id=23611347)

[https://news.ycombinator.com/item?id=23573386](https://news.ycombinator.com/item?id=23573386)

[https://news.ycombinator.com/item?id=23598824](https://news.ycombinator.com/item?id=23598824)

[https://news.ycombinator.com/item?id=23438323](https://news.ycombinator.com/item?id=23438323)

This, from a year ago, reads interestingly now:
[https://news.ycombinator.com/item?id=19737344](https://news.ycombinator.com/item?id=19737344)

------
jdblair
Invisibilia just released a great podcast about trust, based on the experience
of a trader who was harassed by Wirecard. The trader, who was shorting
Wirecard, was subject to surveillance, and a constant stream of phishing
attacks.

[https://www.npr.org/2020/06/02/868001948/trust-
fall](https://www.npr.org/2020/06/02/868001948/trust-fall)

~~~
TekMol
Well, the first half of it was a podcast about that trader. Then it abruptly
shifts into ... I don't know what. A general talk about trust or something.

It left me confused and unsatisfied.

~~~
dharmab
Invisibilia is a podcast about emotions. The second half is fairly typical
episode.

~~~
hi41
Many episodes of Invisibilia deal with similar topics as Hidden Brain. I find
Hisden Brain better and think Invisibilia should be merged. I don’t like
Invisibilia that much because it a lot about feelings and the talk is so much
that I cannot grasp the main point of the discussion.

------
physicsguy
This looks really bad for BaFin, they basically treated the Financial Times as
criminals for blowing the whistle over the last few years.

~~~
itsoktocry
> _This looks really bad for BaFin, they basically treated the Financial Times
> as criminals for blowing the whistle over the last few years._

It's going on, with a variety of companies, every day. The entire system is
beyond corrupt. Regulators are siding with frauds instead of investigating
them.

A major red flag of corporate fraud is attacking journalists and blaming
"short-sellers". Have these entities _ever_ caused the demise of a
_legitimate_ company?

------
fbn79
Now is clear what the company motto "Beyond payments" means.

------
ivanche
This is painful but it's a step in right direction. They have to serve ongoing
processes for a couple of more weeks/months. All subsidiaries that can be sold
will probably be sold to pay creditors. Hopefully all toxic parts will be
removed and a few healthy ones will stay, in one way or another.

------
GrumpyNl
This is the second ceo who started to dress like steve jobs and became a
fraud.

~~~
firethief
Should we be worried about Xiaomi?
[https://www.gizchina.com/2011/08/17/xiaomi-ceo-chinas-
latest...](https://www.gizchina.com/2011/08/17/xiaomi-ceo-chinas-latest-fake-
steve-jobs)

Based on more recent photos, it was just a phase. Maybe the company fixed its
issues before it got caught?

------
sixhobbits
Anyone know if Transferwise Global debit cards are impacted by this?

~~~
pixiemaster
the Wirecard Bank is a subsidiary, that has not filed for insolvency.
(disclaimer: they are checking if they need to file for the subsidiaries as
well - though my guess is they are trying to minimize the impact on the
operations and bank transactions, to save the future of the product).

~~~
pixiemaster
scratch that.

Bafin (german bank watchdog) just froze the accounts, incl. cards of Boon,
which is a wirecard subsidary.

------
the_mitsuhiko
The entire story is shameful. I can just hope the Germans learn lessons from
this.

~~~
baxtr
I am really unsure if it's something "Germans" need to learn. It is probably
something that could happen everywhere...

~~~
smcl
One weird thing I have noticed is that in the UK the phrase “The Germans” is
often used instead of “Germany” (where it’s grammatically valid, of course)
for some reason. It’s _really_ noticeable if you watch British TV coverage of
the World Cup or European Championships.

Don’t know if the OP is British or living there, but it’s possible that this
is what’s happening and they don’t mean “all Germans ...” and just mean “The
appropriate body in Germany the country ...

~~~
CydeWeys
Very common here in the US to do this with all countries. "Germany" is a
country, whereas "Germans" are people. So in a sporting context saying
something like "The Germans are better at passing the ball" makes more
grammatical sense than "Germany is better at passing the ball". Same for the
Italians, the French, etc.

~~~
smcl
It’s not quite the same actually. You’ll see the commentators occasionally
reference Italy/The Italians or France/the French ... but the way they use
“The Germans” is on a different level. I also feel like it’s also said with a
weird intonation, so not “The Germans” but “The _Germans_ ” - with a little
snarl :-D

I don’t know how to explain it - you’d need to watch a World Cup with BBC and
ITV coverage to see it in action. England have a special footballing history
with Germany so it may be related to this.

Note: not implying this was what the original person meant, this is just a
silly tangent :-)

------
lazylizard
Will their cards still work?

------
TekMol

        Trade on shares in the
        company was suspended
    

What does this mean? Is a certain stock exchange not executing trades anymore?
Are all exchanges worldwide in sync not executing trades? If so, how is the
sync achieved?

If it only was suspended at the Frankfurt stock exchange which is mentioned in
the article, it would be interesting to see how it is doing at other
exchanges.

Google is still showing realtime Frankfurt prices. Currently at a market cap
of about €350M.

And what is the reason behind that? Is it guaranteed that shares of a company
that files for insolvency are worth 0? And therefore the exchanges want to
save uninformed investors from buying them?

~~~
joyj2nd
> What does this mean?

That you can not trade the stock for now. Trading has been resumed. On many
stock exchanges there are rules for this. Something very common.

> And what is the reason behind that? Is it guaranteed that shares of a
> company that files for insolvency are worth 0?

No. The company could recover, could get bought etc. As a stock holder you are
the last in line. Should the company get liquidated, bond holders will have a
higher priority for any money recovered.

> And therefore the exchanges want to save uninformed investors from buying
> them?

No. Please look up Hertz, the car rental company and what is happen recently
the stock. They are bankrupt, people are buying the stock and Hertz was even
allowed to issue more shares.

~~~
0xffff2
>They are bankrupt, people are buying the stock and Hertz was even allowed to
issue more shares.

Eh, sort of. The bankruptcy judge said they could, but the SEC said they had
some "questions" about the offering's prospectus and Hertz basically withdrew
the offer after that. It's not clear whether the company actually sold any
shares.

