This past November, we were proud to serve as the exclusive sponsor of a very special discussion at Transactions20, a two-part event by Payment & Banking bringing together many of the biggest names from the digitisation, payments and banking sectors. If you were not able to join us at the live event, don’t worry - we have recapped the conversation we sponsored with Dan McCrum, the investigative journalist at the Financial Times who broke the Wirecard story wide open.
In his interview with Payment and Banking, McCrum tells the story from his perspective, starting all the way back to the summer of 2014 when he first heard of the now insolvent German financial services provider. Below we’ve included highlights from the interview, including his thoughts on what may have kept company insiders from speaking up, the impact of the fake news movement and the personal toll of breaking a story this big.
Revealing what inspired the initial first article by McCrum: The House of Wirecard
“The first time I ever heard of Wirecard was back in the summer of 2014. I was interested in companies which might have accounting problems and I was chatting to an Australian hedge fund manager. We chatted about a few different companies and he sort of paused and told me ‘Now tell me, would you be interested in some German gangsters?’ ...And he told me the story about this funny little German payments company called Wirecard.
I think it was worth 4 or 5 billion euros then. Nobody was really paying much attention to it and he told me a story that it was maybe processing payments for some pretty dodgy things online, possibly child pornography was the allegation back then. And I thought it sounded interesting but there wasn’t much more to it then. And so, maybe this is a company I should take a look at, at some point.”
Explaining when the whole story started to come together
“What I realized in all of these years of reporting on Wirecard, it wasn’t a normal company. It hired lawyers like normal companies do but it was also hiring hackers it seemed and there were bribes being talked about, and surveillance.”
McCrum goes on to say that the whistleblowers first contacted the Financial Times in late 2018 (four years after they began their investigation), and while his team already had the story of what was happening, they had to ask themselves if it was indeed all true.
Concerned about hacking and surveillance, McCrum worked in what was essentially a bunker with an off-the-grid computer, printing documents and organising them into piles while a colleague in Singapore was knocking on doors trying to find other whistleblowers that would confirm parts of their story.
The reaction of the company was “unusually harsh”
“Every time you publish something the company would just flat out deny it or offer some explanation which made no sense. So, in that respect it meant we were clearly onto something…We had expected they’d accuse us of being in league with short sellers because they had been using this trick for years. They had demonised their critics as just malicious and trying to manipulate the share price. And you know, they said that the FT had been naively used by short sellers for a long time.”
McCrum also describes the the various ways Wirecard attacked him and his publisher, which ranged from anonymous Twitter bots crying for his personal imprisonment, denouncing his character and integrity, the offer of secret bribes to remove unflattering stories from the Financial Times' websites and ultimately, the filing of a formal criminal complaint against him and his colleague on behalf of the financial regulatory authority for Germany, BaFin.
Paranoia sets in as the investigation reaches its climax
When asked to explain what it was like to be at the centre of a story this big, McCrum paints a picture straight out of a thriller novel. “For anybody who hasn’t followed the story completely closely, we reported at one point that Jan Marsalek (former COO at Wirecard), as well as being a senior executive at a financial institution, had a side hobby which was trying to build a militia force on the Libyan border in league with his friends who seemed connected to Russian intelligence and we were quite cautious before that. Like I said, I was working on an off-the-grid laptop -- we would never take phones into meetings with us because we were worried about surveillance...So, we were taking all these sorts of precautions but then when you go oh there might be a state actor involved and it’s the Russians…they have a certain reputation. So, I mean we can laugh about it now because it sounds ridiculous doesn’t it?
I would have moments where I’d be riding home on my bike in the dark and you would go, ‘gosh well, if suddenly got knocked off my bike that would just be bad luck now right?’ You’d have these sorts of dark moments where you start to go, ‘right this is a little bit hairy.’”
The fake news phenomena reaches the Financial Times
A defining term of the previous four years, fake news has found itself firmly planted in our collective lexicon and an increasingly popular accusation levelled against journalists breaking stores both big and small. But this would be the first time McCrum, as an investigative journalist, found himself in the fake news spotlight.
“For me it was the first real time I had encountered personally the whole fake news thing. So, you know Donald Trump and the rest of it had sort of practiced this thing. There was incredible investigative journalism done into every aspect of Donald Trump’s character and business and he would just wave it away as fake news and then to experience that, to have the FT waved away as fake news and be told we’re corrupt was quite a weird thing to get your head around.”
“Did the regulators ever understand Wirecard's business model?”
Yet the question remains, what were Wirecard’s investors thinking?
McCrum explains that the hype surrounding new financial technology may have played a large role in investors' willingness to ignore red flags.
“We’ve just lived through this golden age of FinTech where anything to do with FinTech is treated as amazing. You don’t look at the business as it is now. You look at the wonderful horizon, how big could it be? What could it be doing? That’s the basis of a lot of FinTech evaluations now. Wirecard really played into this. It put out ridiculously detailed targets. Markus Braun (former CEO at Wirecard) could tell you what sales and profits were going to be in 2025 and they were going to be huge. And so, I think a lot of people just went, payments is growing fast, there aren't many payments companies to buy, Wirecard seems to be doing well. We’ll have some Wirecard.
But that’s not really enough is it?”
To summarise how the scandal was made possible, and able to go on for so long, in McCrum’s own words, “You can’t run a fraud of this magnitude without people.”
Interested in the full story as the leading journalists experienced it? Read the full account from McCrum himself in his story for the Financial Times here.