
Wirecard CEO exits as search for missing billions hits dead end in Asia - hhs
https://www.reuters.com/article/us-wirecard-accounts/wirecard-ceo-quits-as-search-for-missing-billions-hits-dead-end-in-asia-idUSKBN23Q0YA
======
sneeze-slayer
NPR's Invisibilia did a really interesting show/podcast on one of the biggest
short sellers of Wirecard and how he has been harassed for the past few years.
I highly recommend people listen to if if they are interested in this crazy
Wirecard tale! It's titled "Trust Fall"

[https://www.npr.org/transcripts/868001948](https://www.npr.org/transcripts/868001948)

~~~
empath75
“Never threaten to cost someone more than it would cost to have you killed.”
is a reasonable rule to live by.

~~~
basseq
With the important caveats of 1) the _implicit_ costs of murder-for-hire are
probably pretty high (risk of going to jail, e.g.) and 2) killing someone
doesn't necessarily make the lawsuit go away—though that doesn't help the
person being killed.

So the utility formula is something like:

    
    
      (p[c] * c[f] + c[a]) ÷ p[l] > c[l]
    
      where:
      p[c] = probability of getting caught
      p[l] = probability of the lawsuit being dropped
      c[f] = value of your freedom
      c[a] = cost of an assassin
      c[l] = cost of losing the lawsuit
    

You can layer in additional probabilities—like the probability of the
assassination being successful, or the probability of winning the case. This
is just fun to talk about the utility formula of assassinations on HN.

But it's probably true that as c[l] increases, c[f] increases as well, and
p[l] drops. So it's rarely (never?) worth this trade-off.

~~~
catalogia
You forgot _' probability that your opponent reasons matters like this out
rationally'_, which is a big one I think.

~~~
basseq
Which, if you want to get pedantic—and yes! let's get pedantic!—probably
correlates with a lower probability that the assassination isn't successful.
Because if they're irrational, they're going to end up meeting an undercover
cop in the parking lot of the local K-Mart or something.

See also: _Tiger King_. Which is probably the best citation and the best thing
I'll type all day.

~~~
fragmede
Ah yes, Tiger King, a well balanced documentary that presents an in-depth look
at the practices of murder for hire, and not a lurid tale of entertainment so
Netflix can make more money. Popular media, especially shows like CSI and Law
and Order, have an incentive to show the rich white folk how resolute the
government is, and just how much no one could ever get away with murder. The
reality's a bit different, and as recent events have shown, the police aren't
above murder anyway. They protect their own and accept murderers in their
ranks. So, an ex-cop or current cop is probably the _best_ person to properly
incentivize to commit murder.

For them, `p[c] = probability of getting caught` expands to a[c] = probability
of getting caught a[b] = probability of there being no repercussions despite
getting caught.

But if we're gonna base today's lesson on how to get away with murder on the
show _Tiger King_ , the two step lesson it teaches is: 1. own a tiger
sanctuary. 2. feed your husband to the tigers for lunch.

~~~
catalogia
One of them was convicted, and the other wasn't. Sure that's not _proof_ of
anything, but it's more than just the netflix documentary that says he did it.

------
H8crilA
A very good thread summarizing what happened in this massive fraud:

[https://mobile.twitter.com/DonutShorts/status/12736903626080...](https://mobile.twitter.com/DonutShorts/status/1273690362608078848)

Expect more revelations in the coming year or so:

> "Only when the tide goes out you find out who has been swimming naked" \-
> Warren Buffet

> "The fraud cycle follows the business cycle" \- Jim Chanos

~~~
TheOtherHobbes
Are there _any_ honest, reputable operators in the financial industry?

Between Enron, S&L, Lehman, WorldCom, AIG, Wirecard, Madoff, VW, gold price
fixing, 1MDB, and all the "lost" BTC stories - among so many others - it seems
like a question that needs to be asked.

~~~
pjc50
There are degrees of this issue; any business handling money is going to
attract fraud, the question is how well the internal controls deal with it and
whether management are in on it.

At one end is Lehman, which was incredibly over-leveraged and only slightly
fraudulent ( [https://www.accountancyage.com/2010/12/21/ey-sued-over-
lehma...](https://www.accountancyage.com/2010/12/21/ey-sued-over-lehmans-
audit/) ), but set out to be a legit investment bank. AIG is in a roughly
similar category. There was some fraud:
[https://www.sandiegouniontribune.com/sdut-gen-re-aig-
trial-0...](https://www.sandiegouniontribune.com/sdut-gen-re-aig-
trial-012709-2009jan27-story.html) \- but the collapse was due to leverage.

At the other end are Madoff and 1MDB, which were intentionally fraudulent from
the beginning.

The "lost" BTC stories are just off in outer space; the bitcoin ecosystem
doesn't acknowledge fraud or accounting control as a concept, because that
goes against "code is law" and transaction irreversability.

~~~
TheOtherHobbes
Real people lost a lot of BTC on Mt Gox, so I'm not sure how the BTC stories
are in outer space.

Apart from that, the second half of your first sentence is exactly the
question - is fraud _endemic_ to this industry, and actually central to its
operation?

The popular perception is that the industry is somehow fundamentally honest
with a few bad-actor exceptions.

Considering how regularly fraud happens, how damaging it is, and how rarely
it's flagged by auditors and regulators, I think it would be useful to
question that view.

Or to invert the polarity - how many significant potential frauds have been
prevented by auditors and regulators, or by paperwork theatre like KYC?

Are there any? If so, how do the numbers compare with the number of frauds
that blow up into real financial and reputational damage?

~~~
hitpointdrew
>Real people lost a lot of BTC on Mt Gox, so I'm not sure how the BTC stories
are in outer space.

That was the fault of Mt. Gox, not bitcoin. Also the fault of uneducated
users, don't leave your bitcoin sitting at an exchange.

~~~
pjc50
^ This is what I meant by the bitcoin community defining fraud as "not fraud,
also your fault"

~~~
hitpointdrew
You clearly don't understand how bitcoin works.

Saying Bitcoin is flawed because Mt. Gox got hacked, is like blaming the
manufacturer of your car because it was stolen when you left it in parking
garage with no attendant, and left the keys in the ignition with the window
down.

There was no technological flaw with bitcoin itself, there was plenty of
technical flaws with Mt. Gox web site.

------
gizmo
Wirecard's massive fraud has been documented for over a decade, but the German
financial oversight group BAFIN refused to do their job and investigate the
fraud claims: [https://valueandopportunity.com/2020/06/19/wirecard-the-
germ...](https://valueandopportunity.com/2020/06/19/wirecard-the-german-enron-
a-very-personal-history-2008-2020/)

There are some real lessons here about journalism, efficient markets, govt
oversight, and truth prevailing in the very long run.

~~~
TheOtherHobbes
It's tempting to wonder if perhaps elements in the German political and
financial establishments were profiting from this, and the CEO will be the
fall guy.

It seems extremely organised and well-protected for alleged fraud.

Usually fraud relies on personal/corporate reputation. But when you have both
lawyers and hackers being employed to take down critics and investigators,
it's reasonable to ask questions about regulator collusion and political
influence.

~~~
ar0
I call Hanlon's razor: "Never attribute to malice that which is adequately
explained by stupidity".

The problem was that German politicians were extremely desperate for at least
one large-scale German "new tech business" success story, and Wirecard seemed
to be the only candidate that on the face of it appeared to fit the bill. That
blinded them to the obvious and made them see an anglo-saxon conspiracy to
keep German tech down behind every reasonable story about Wirecard.

In my opinion, it shows the dangers when national protectionism and picking
winners intrudes in the supposedly neutral business of regulating critical
businesses.

~~~
vkou
You should also never attribute to stupidity that which is adequately
explained by greed.

~~~
corty
There is also a saying usually when discussing stock trading: "Gier frisst
Hirn". Greed eats brains.

------
ckastner
As I mentioned in another submitted story: SoftBank really knows how to pick
them. It invested 1 billion about a year ago [1].

[1]
[https://www.bloomberg.com/news/articles/2019-04-23/softbank-...](https://www.bloomberg.com/news/articles/2019-04-23/softbank-..).

~~~
jansan
But not directly. WSJ wrote "Funding came from personal accounts of a group of
SoftBank employees and an outside investor."

Doesn't make it better, does it?

~~~
koheripbal
It's definitely better for SoftBank.

------
lazyjones
What a strange situation. WireCard immediately looked dubious when I did some
research about it last year (as a regular stock investor) and I often stumbled
over opinions like this one
[https://www.deraktionaer.de/artikel/aktien/markus-krall-
luft...](https://www.deraktionaer.de/artikel/aktien/markus-krall-lufthansa-
oder-wirecard-halte-mich-an-warren-buffett-20202608.html) (German, sorry)
where somewhat reputable people said they would never consider investing into
WireCard, without giving a specific reason. The business model of a payment
provider is straightforward and ought to be hard to get completely wrong,
"what's there to be afraid of that nobody wants to speak about?", I was
wondering. In hindsight it's like everybody knew or had a gut feeling
something was fishy but decided not to talk about it.

------
dang
Not much recent HN discussion on this. Some here:
[https://news.ycombinator.com/item?id=23438323](https://news.ycombinator.com/item?id=23438323).

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

~~~
dmix
Looks like the fraud was even worse than what last year's FT investigation was
suggesting.

Originally it was just a few million transferred between multiple subsidiaries
to fake sales figures to meet quarterly projections. Now actually "losing"
billions of dollars sounds much worse.

I guess where there's smoke there's often fire.

------
pythonwizz
Wirecard has been accused before of fraud by so called "short sellers". The
document published (2 years ago?) showed a tremendous, extraordinary complex
network of international corporations. Such complex setups have a very limited
purpose. It can basically be only tax "optimization", hide fraud or hide
ownership (UBO). After having seen this PDF I would not touch the Wirecard
stock.

By the way, I think Alibaba is opening two new corporations. Per day. You may
also want to read at Bronte Capital about Alibaba.

~~~
boldslogan
Can you remember any keywords to find that pdf or link with the multiple
company set up about this?

Thanks for the alibaba tip.

~~~
pythonwizz
No I dont. Wirecard went very aggressively against the accusations. The
discussion board where it was discussed removed the link since Wirecard were
suing everybody.

Could have been this one, but I am not sure. Just peaked into it and did not
see the page with all the interrelated companies.

[https://www.scribd.com/document/301557004/Wirecard-
pdf](https://www.scribd.com/document/301557004/Wirecard-pdf)

------
adventured
And there's Masayoshi Son and SoftBank, plowing $1 billion into Wirecard a
year ago, for a 5.6% stake.

Mr. Enabler seems to have secured a prime seat for many of the big frauds &
scandals in tech from the past few years.

At this point regulators should just be tracking SoftBank to watch where
they've stuffed the Saudi money (or in this case, it's a very unusual UAE &
SoftBank financing arrangement).

Bloomberg story out right now:

"The meltdown at Wirecard AG is raising questions about the company’s
complicated relationship with the troubled SoftBank Group Corp."

[http://archive.is/ipWck](http://archive.is/ipWck)

~~~
easytiger
My favourite SoftBank investment was the automated pizza van thing.

I can only hope SoftBank had shares in a failing robotics company that it
needed to funnel money to

~~~
Danieru
The pizza van guy was active here on hacker news right? I remember seeing
posts from a robot pizza guy. Shame they got caught up with softbank.

~~~
easytiger
I don't think being caught up with SoftBank is the issue. More that SoftBank
have a subset of very negative indicators in their selection process

~~~
Nasrudith
It seems that lack of a remotely viable businesses model and trying to scale
things that don't are are common SoftBank flaws. Like WeWork and the countless
scooter and ride share at a loss companies with little true barrier to entry
and can hardly pay for themselves while infamously underpaying their
workforce.

------
fabian2k
There are 1.9 billion EUR missing, not sure if the implication is that they
were stolen or never existed in the first place. I also can't really think of
any possible explanation for this to go so far when the banks in question say
that the account never existed at all. It doesn't seem believable that anyone
seriously investigated the potential fraud in the last months or years, and
the scandal has been public for a while now.

~~~
jansan
You cannot believe how sophisticated fraud can be. There was an amazing fraud
scheme in Germany in the 1990s by a company called FlowTex. Their business was
selling drilling machines for the oil and gas industry.

The amazing part about the fraud was that they sold 3000 drilling machines,
but only about 300 actually existed. You would think it should be easy to
simply count the existing drilling machines, but they changed the serial
number plates and presented the same machines over and over again to investors
and auditors. Just unbelievable that this worked for a few years.

~~~
mtmail
[https://en.wikipedia.org/wiki/FlowTex](https://en.wikipedia.org/wiki/FlowTex)
Saw a documentary with the founder the other day, served 7 of a 12 year prison
sentence.

~~~
tibbydudeza
Interesting here is a documentary on this
[https://www.youtube.com/watch?v=fQ5m0Gv-
xKM](https://www.youtube.com/watch?v=fQ5m0Gv-xKM)

------
miohtama
Wirecard is issuer of most crypto debit cards

[https://cointelegraph-
com.cdn.ampproject.org/c/s/cointelegra...](https://cointelegraph-
com.cdn.ampproject.org/c/s/cointelegraph.com/news/major-crypto-debit-card-
issuer-reportedly-missing-21b-in-cash/amp)

------
easytiger
Slightly awkward tweet from him:

> We are overachievers. Wirecard’s business is going strong into the future
> and we are very much looking forward to a successful year.

[https://mobile.twitter.com/_MarkusBraun/status/1228257269567...](https://mobile.twitter.com/_MarkusBraun/status/1228257269567119361)

~~~
pieterhg
Old tweet

~~~
easytiger
Feb this year. Not old.

~~~
umeshunni
Well, he said pretty much the same thing today:
[https://mobile.twitter.com/_MarkusBraun/status/1273974132531...](https://mobile.twitter.com/_MarkusBraun/status/1273974132531658754)

------
tex0
Can someone please explain to me how 1.9B can go missing? I'm probably too
naive, but I really don't how that much money can get "lost".

~~~
weinzierl
Bloomberg article from yesterday[1] phrased it as _" [..] auditors couldn’t
find about 1.9 billion euros ($2.1 billion) in cash [..]"_ and _" [..] were
unable to find accounts [..]"_

I, too, was wondering what to think. How can I imagine to be unable to find an
account?

[1]
[https://www.bloomberg.com/news/articles/2020-06-18/wirecard-...](https://www.bloomberg.com/news/articles/2020-06-18/wirecard-
drops-in-early-trading-before-delayed-financial-results)

~~~
jansan
As I understand it Wirecard had a written confirmation by two Phillipine banks
that there is 2 biion in desposits. E&Y got suspicious, because the
confirmations arrived really fast, much faster thank banks usually take to
issue these papers. So they sent a guy in the Phillipines to the banks to
investigate. The banks claimed that there are no deposits and the documents
were issues by an employee without authorization.

------
jansan
Anyone remember L&H, the famous computer translation company that went
bankrupt in 2001? At one point they had a whopping market capitalization of
almost 10 billion US$!

IIRC they also claimed that a large sum of money somehow got missing in Asia
(South Korea I think). But given that the management actually went to jail, it
seems the fraud actually originated in their headquaters in Belgium.

~~~
easytiger
I didn't when you wrote L&H, but on searching and finding it was

[https://en.m.wikipedia.org/wiki/Lernout_%26_Hauspie](https://en.m.wikipedia.org/wiki/Lernout_%26_Hauspie)

I do indeed remember them and their software.

~~~
aashu_dwivedi
I didn't remember them by name but after reading the wikipedia page, I
remember they are the company which acquired Drangon systems in liu of a large
number of stocks.

~~~
weinzierl
If I remember the story correctly the founders of Dragon Systems sued the bank
that handled the acquisition. They claimed the bank convinced them to take
stock and not cash at a point in time when the same bank already had been
preparing for the inevitable bankruptcy of L&H. They lost because M&A was
considered a different branch of the bank and not supposed to know about the
imminent bankruptcy.

BTW: The founders of Dragon Systems are a married couple with an interesting
bio too.

------
baxtr
It’s a shame that this company is part of the DAX, Germany’s large cap index
of its 30 largest companies. I hope they get expelled soon

~~~
H8crilA
They already are, their participation drives down with the market cap :D

On a more serious note - Merkel will have to do some serious firing and
locking up in prison. At least I hope she does that, if not frauds will only
multiply.

~~~
corty
Merkels party CDU is very much the political arm of the corrupt old boys
network. E.g. her former minister of finance, now head of the Bundestag,
Schäuble, was deeply involved in a corruption scandal. Currently that same
network seems to rear its head in the Amthor scandal.

Therefore I doubt very much that a lot of firing and locking up will happen,
just some token amount with a sprinkling of shuffling positions and failing
upwards...

------
LatteLazy
We really do need some process where by the accounts of large companies are
reconciled with reality. I understand completely that this is not possible for
all the numbers investors want to see (Profit is made up after all). But there
should be a requirement to report certain hard numbers (cash revenues and cash
held for instance) that should be audited and correct to the penny on a given
day. If a business claims to have received 1m $/£/E in cash sales, they should
be able to show their accountant credit transactions for that amount and 0.1%
of those should be checked by calling the customer and confirming they paid
the money. The same applies for cash on hand on a historic day.

Nothing will make fraud impossible, but right now it's just so easy...

~~~
withinthreshold
Which is exactly the usual audit procedure - a sample of account balances and
turnover is tested (i.e., confirmed) with the counterparty as part of testing.

------
noneeeed
Can anyone recommend a good overview read of this whole thing? I seem to have
missed it all.

~~~
fluffything
There is none yet, but there is enough material for a Netflix mini-series.

------
actuator
The article didn't have more details on it but it seems like EY didn't sign
off on accounts after KPMG report indicated fraud. Shouldn't the blame lie on
EY as well, as they failed in their job as an auditor, shouldn't they have
been the ones to found as they had all the internal info while auditing.

------
knlam
Sorry for my ignorance, according to the source, Wirecard hired KPMG last year
to conduct an independent audit to address allegations by FT.

Why would anyone who run the fraud hired an auditor to expose their fraud? Do
they think they can get away with it? Why not just ignore the allegations?

------
everybodyknows
As reported by the German press:

[https://m.dw.com/en/wirecard-ceo-markus-braun-
resigns/a-5387...](https://m.dw.com/en/wirecard-ceo-markus-braun-
resigns/a-53870101)

------
6510
Centralization and scale are amazingly efficient but when things go wrong it
similarly scales all the way. But hey, at least it wasn't 2.3 trillion this
time.

------
x87678r
2 Billion? Isn't that just a regular burn rate for a fintech startup? I'll
assume this company just gets some funding then continues on its way.

~~~
s_dev
Who's gonna fund a company that just exposed itself as having fraudulent
accounting?

~~~
nikanj
SoftBank

------
andi999
When people think about a billion dollar exit for a startup founder, not
exactly this picture comes up :-)

------
plerpin
Ah, crypto and fraud, peas in a pod.

------
Mordan
Someone explain to me why MS was forced to allow competing browsers and today
Apple forces you to use their own browser engine?

Isn't that a double standard?

~~~
ubermonkey
I mean, I can, but this is probably the wrong thread.

You're also slightly off about "allowing" competing browsers. MS never limited
other browsers in Windows; you were always free to download another (and there
were others). It just gave IE an absurd inside track by including it FREE with
Windows and making it the default, which was hugely damaging to Netscape
(which, at the time, was charging money for a browser; yes, this sounds
bananas today).

This was a textbook example of monopolistic behavior, since at the time
Microsoft OWNED computing. There wasn't another viable platform. The Mac was,
at the time, circling the drain. Desktop Linux didn't exist. If you wanted a
computer, you ran Windows, full stop. MSFT was leveraging their enormous
monopoly power to give them a monopoly in _another_ market (browsers), and
that's a big anti-trust no-no.

Apple has nowhere near that kind of market power. The iPhone is a _minority
player_ in a huge market -- much bigger than the PC market Microsoft dominated
in the 90s. Android holds a majority position there.

This means Apple doesn't have a monopoly. You can, and people do, buy
something else that allows you do configure basically whatever you want. Apple
isn't distorting or damaging the phone/mobile market with their behavior, as
MSFT was.

Apple definitely DOES have enormous influence and power in mobile computing.
That's very true. But because they are a minority player, they don't _control_
the market. And so there's no real legal argument on antitrust grounds to
compel them to do anything differently.

~~~
saberdancer
Was this an issue just because Netscape charged for their browser?

Microsoft includes a lot of stuff with the OS, from calculator, file manager,
rudimentary word processor, ... How is a browser any different? I understand
now we know that the ads and search engine control became vital but I doubt it
was predicted at the time. Maybe the regulators believed MS was trying to get
Netscape out of the business only to start charging a premium for IE.

~~~
ubermonkey
Partly, because MSFT deliberately included a competing product in the OS for
free to destroy Netscape's business, and doing this from a position of near-
total control of the ENTIRE personal computing market is literally the
definition of monopolistic behavior.

