Ultimately, the single most important question at Wirecard was what would happen to the remaining €1.9 billion. 2020 saw the fall of Wirecard, which set off one of Germany’s largest financial scandals. Jan Marsalek, the company’s chief operating officer, is a fugitive, while founder and CEO Markus Braun is in detention for trial. The true questions at Wirecard, though, are whether the money was ever at Wirecard and how the company was set up at the time. FinTelegram attempts to make some connections!
The Company Network
It is best to characterise Wirecard’s organisation as open and amorphous until its demise in the summer of 2020. It wasn’t so much a firm as a network of companies. High-ranking Wirecard managers like Dietmar Knoechelmann and Ruediger Trautmann, as well as their friends and family, seemed to have two jobs in addition to managing and owning network companies that surround Wirecard.
These Wirecard managers were simultaneously inside and outside of Wirecard in a personal union. They appeared to have the authority to transfer money between partner bank accounts and Wirecard in certain instances, allowing them to do it whenever they pleased.
We would like to go into further depth about the then-current “open” organisational philosophy, using PowerCash21 Limited (now Payabl) and GreyMountain Management Ltd. as Wirecard partners.
The Payabl Legal Matter
As the CEO of the Irish Wirecard subsidiary Wirecard Payment Solutions, Dietmar Knoechelmann, a dual citizen of Germany and Israel, was found guilty in Israel in November 2016 of aiding and abetting fraud in the Israel Credit Cards Cal Ltd (ICC-Cal) money laundering scam that occurred between 2006 and 2010. He entered a guilty plea.
Ayelet Fruchtlander Knoechlmann, the Israeli wife of former Wirecard executive Dietmar Knoechelmann, co-founded the payment institution Payabl (previously PowerCash21), which is regulated by the Bank of Cyprus. Ruediger Trautmann is one of the directors of this company. According to Fraser Perring’s Zatarra Report, Dietmar Knoechelmann and Ruediger Trautmann would have been at the core of the Wirecard fraud scheme, and Payabl—then known as PowerCash21 or PowerPay21—might have been involved.
Fraser Perring, a Wirecard short seller, claims that Dietmar Knoechelmann and Ruediger Trautmann collaborated at Kronos Limited, an Irish-based company that Wirecard purchased in an unreported deal.
The lines separating Ruediger Trautman Dietmar Knoechelmann and his wife, Ayelet Fruchtlander Knoechelmann, from Wirecard and its associate firms were hazy and unclear.
The Irish GreyMountain Management Case
Ireland and Wirecard UK & Ireland Ltd. are important components of Wirecard’s European and North American operations. The company’s Dublin offices were located at Ulysses House, 1 Foley Street. There were other offices for Knoechelann’s Wirecard Payment Solutions Holdings Limited. In addition, David Cartu’s GreyMountain Management Ltd.
Michelle Molloy served as the CEO of Wirecard Ireland. Her cousin Danielle Earle worked as a financial manager at GreyMountain Management Ltd (GMM), and her son Ryan Coates was a director of the company. Michelle Molloy directly joined David Cartu’s Mega Simple Solutions Ltd. as a director. The lines separating Wirecard from its affiliated businesses centred on the Cartu brothers were hazy and unclear.
Payment processors such as GMM were involved in the massive binary options fraud networks that surrounded the Cartu Brothers, David, Jonathan, and Joshua Cartu, who scammed investors all over the world out of hundreds of millions of euros.
In the massive Israeli binary options market, Wirecard served as a payment processor via GreyMountain Management Ltd. and other Cartu Brothers entities.
Wirecard Scandal In Brief
The payment processor and financial services provider Wirecard, with its headquarters in Munich, Germany, went bankrupt as a result of a string of unethical business practices and false financial reporting. The business was included in the DAX index. Along with the issue and processing of physical cards, they also provided risk management and electronic payment transaction services to their clients. The subsidiary, Wirecard Bank AG, had agreements with several foreign financial services firms and possessed a banking licence.
Since the company’s founding, there have been claims of accounting malpractices, which peaked in 2019 when the Financial Times released a number of investigations, internal papers, and whistleblower accusations. Following the disclosure that €1.9 billion was “missing” and the dismissal and apprehension of its CEO, Markus Braun, Wirecard filed for bankruptcy on June 25, 2020. Concerns have been raised concerning potential misconduct by Ernst & Young, Wirecard’s longtime auditor, and regulatory shortcomings on the part of Germany’s top financial watchdog, the Federal Financial Supervisory Authority (BaFin).
A forensic financial expert explained how $2 billion disappeared from Wirecard’s balance sheet—the company’s former CEO was recently taken into custody.
- A whirlwind controversy has engulfed German payments company Wirecard after more than $2 billion vanished from its balance sheet.
- When the company’s CEO, Markus Braun, was detained on Monday night after quitting on Friday, the crisis grew more intense.
- The money that Wirecard had left over was about equal to what it had lost, according to a financial forensics team at CFRA Research.
- Wirecard had threatened to cancel almost $2 billion worth of loans to the company if it couldn’t release its results for the first quarter of 2020 and the entire year 2019 by June 19.
- The research team discovered that the $2 billion in cash was difficult for the corporation to access because its remaining balance is connected to regulated entities.
- It used a network of offshore affiliates and escrow accounts to conduct millions of cross-border transactions. Due to this, it was difficult for auditors to confirm cash balances and impossible for an outside observer to track revenue;
- Its legal business had no margin, which made manipulating profits simple;
- It was nearly impossible to physically watch its business operations, making it challenging for an outside observer to estimate the amount of activity conducted within the company;
- Because its industry was thriving, it could record extraordinary growth without raising red flags;
- It was viewed as a national champion, but its finances, which mixed together non-banking and banking operations, obscured many of the warning signs that forensic accounting typically reveals. German officials often looked into or even accused those who opposed the corporation of manipulating the market. It was difficult to oversee because it crossed regulatory borders as both a bank and a non-bank.
- Because of its intricate procedures, it was challenging for an auditor to verify that the bank actually had cash on hand.
Last week, the German fintech company Wirecard had an almost 80% decline in its stock price in only two days after its auditor, EY, revealed that it was unable to locate €1.9 billion (approximately $2 billion) in cash, which accounted for nearly 25% of the company’s balance sheet.
Wirecard stated on Monday that the money missing was probably never there. By Tuesday, the CEO, Markus Braun, who departed on Friday, had been detained in Germany on charges of manipulating the balance sheet of the company.
Braun’s bail was set at €5 million, and according to the prosecution, he would need to appear in court every week, as reported by Reuters.
Wirecard announced last week that it would have to cancel almost $2 billion in loans it had obtained if it could not provide a new set of financials by this coming Friday.
Markets Insider was informed by Richard Sbaschnig, the leader of CFRA’s financial forensics research team, that Wirecard is currently experiencing a liquidity crisis as a result of its inability to secure the money necessary to repay these debts.
In a separate interview, Sbaschnig told CNBC, “There are typically regulatory restrictions on accessing this cash for general corporate purposes.”
Wind-Up- Wirecard Aftermath
Criminal cases arose in Germany, Singapore, the Philippines, and other places as a result of the Wirecard crash.
The primary trial for former Wirecard CEO Markus Braun started in late 2022 and is being held in a high-security courtroom at Munich’s Stadelheim prison. Both Stephan von Erffa, the accounting supervisor, and Oliver Bellenhaus, the head of Wirecard’s Dubai business, are on trial as well. The former COO, Jan Marsalek, is missing and thought to be in Russia. Braun has already suffered two defeats in court.
The trial is anticipated to go until the very end of 2024 at the latest because it is proving to be extremely complex due to a lack of concrete proof. Markus Braun faces charges of fabricating income from transactions with purported third-party acquirers in order to manipulate the market and misrepresent Wirecard’s accounts.
Since the prosecutions started, there have been numerous turns and turns. In the most recent development, on November 16, an Israeli private investigator was found guilty of participating in a US$4.8 million hacking plot that targeted journalists and Wirecard critics, and was sentenced to 80 months in prison.
