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Wirecard: A payment processing company and The missing € 2 Billion.

Wirecard was a German fintech company and was founded in 1999 at the offset of the dotcom bubble. Wirecard helped in processing online transactions. Like when someone had bought something online from a merchant, the Wirecard got the information about the card and gave it to the card-issuing firm or bank for collection of the money from the card holder’s account. Wirecard then credited this money to the merchant and kept the commission with itself. There are many companies who are in this business but Wirecard was the darling of the investors in Germany and was 7th most valuable company there. Wirecard got this valuation because of its claim of huge profits across the globe which they said was due to their technological advancement and tremendous expansion in the Asian region.

Earlier this week Wirecard filed for insolvency after an accounting fraud bloomed out of the company when an auditor reported that they were unable to find 2 billion euros held with the Wirecard. This fraud was running from the past 15 years and many investigations were initiated against this finance mammoth, especially by the newspaper Financial Times. Financial Times and their reporters who were working on this story had to face many legal notices for defaming the Wirecard. Even the security regulator of Germany put an unprecedented ban on the short-selling of Wirecard stocks after the claims made by Wirecard against the Financial Times that they were falsely accusing them to manipulate the share price of the Wirecard.

How the fraud took place?

Like any other big fraudulent companies, Wirecard too had the three basic characteristics:-

  • A complex corporate and accounts structure which is deliberately made opaque to hide transactions.

  • A charismatic frontman who does not accept any allegation against him and tend to divert them against the other issues.

  • Complain about the short sell manipulation.

According to Wirecard, their major costumers was the pornographic and gambling website merchants which did not want to disclose their names. This gave a chance to Wirecard to generate false consumer receipts and cook up the account books. Wirecard processed their payment via third party acquirers (Acquirers are the other entities which facilitate the payment for the merchant by the customers and charge a commission from the merchant for this).

These acquirers helped the Wirecard to operate in those countries in which it didn’t hold the license to commence the financial business. In the last decade, Wirecard bought many acquirers across many countries like Dubai, Philipines, Singapore and many others. Wirecard said that these acquirers did business on the behalf of them and paid them huge commissions for the transactions. Half of the business stated by Wirecard came from these acquirers. The issue was that some of the acquirers were that either they didn’t exist or didn’t have the customers.

  • When Financial Times asked the top customer of Dubai based acquirer, Al Alam solutions, about the Wirecard, 15 of them told that they never heard of the company and 8 of them had shut their business operations many years back.

  • Conepay, another acquirer of the Wirecard had a registered address of their headquarters in Philipines which was owned by a person who had never heard about Wirecard in his life.

  • Maxcone the predecessor of the Conepay had their office registered, an empty garage, in Manila city of whom the local authorities had no information and they didn’t know that a payment company was ever operated in their city.

These are a few examples of fake acquirers setup by the Wirecard to forge the number and to inflate the earnings in their accounts.

Where was the Money?

As Wirecard was getting huge commissions from these acquirers the question became obvious that where Wirecard was keeping the money. To dodge this question and to deceive the auditors Wirecard stated that they didn’t keep their money in company’s account instead they deposit it in the escrow accounts in a bank in Philipines (Escrow accounts are accounts which can be used by many people and a trustee oversees that account). According to Wirecard, 2 billion euros were deposited in these escrow accounts. When the auditors asked about the bank accounts from Philippine's bank they told that they didn’t have the account of Wirecard with them and the auditors stated that they were unable to find those 2 billion euros and scam came in front of the world.

According to analyst either this money had never existed and Wirecard created this only to inflate its share prices or the businesses which created this money were not working on the behalf of Wirecard and were paying the profit to someone else somewhere. In the end, a fraud was surfaced and a company which at one point of time worthed 17 billion euros now worths Zero.


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