Book Review: Money Man - Dan McCrum

Astria Zahra Nabila

“What they found was damning. Pav Gill could watch a series of frauds unfold. In one email a member of the finance team sent himself the logo for a company. In the next he attached an invoice bearing that logo for payment by Wirecard, an amateurish forgery. Gill soon identified a string of suspect transactions. Documents were backdated, contracts were signed for software without any involvement of the Wirecard sales or technology teams. The amounts for each weren’t huge, but the book-cooking operation had been going on for years.” (pg. 158-159)

In 2001, a collapsing payments processor named Wirecard was purchased by German entrepreneur Paul Bauer-Schlichtegroll, starting a dramatic episode that culminated in what was probably one of Germany's most prominent financial scandals. Initially, the design of the Wirecard itself was pretty straightforward: processing debit and credit card transactions. Soon after its rescue operation, however, Bauer redirected the company’s target market to the grey area of online businesses, predominantly gambling and pornography. While marked with dubious practices, the rebirth of Wirecard was soon followed by a success story.

Wirecard experienced a meteoric rise in Germany’s business world. Starting with only $0.27 billion market capitalization in 2005, Wirecard’s market cap peaked at $18.77 billion in 2018, a year before its full-blown scandal in 2019 (companiesmarketcap.com, n.d.). The year 2018 was indeed hailed as the hallmark of the fintech giant as it even succeeded in replacing Germany's second-largest bank Commerzbank in the prestigious DAX 30 Index. All of these achievements crumbled like a house of cards after investigative journalist Dan McCrum unveiled the dark side of the company in a series of articles published on the Financial Times blog, which were then adapted to his award-winning book Money Men: A Hot Startup, a Billion Dollar Fraud, a Fight for the Truth.

McCrum’s investigative work began when he was contacted by a short seller who had been monitoring Wirecard’s illicit practices. The relationship between the company and short sellers had indeed always been contentious. Short sellers make a profit by making high-risk speculations on the decline of stocks' prices which, most of the time, are based on short sellers' analysis of companies' activities and trajectories. In the case of Wirecard, a number of short sellers had long flagged irregularities in the company’s accounts, while the company itself had often blamed short sellers for market manipulation by intentionally spreading false accusations in order to cut its share price.

In 2016, short sellers under Zatarra Research released a report denouncing Wirecard and its executives as partaking in a large-scale money laundering conspiracy, including defrauding Visa and Mastercard by intentionally miscoding transactions, among others. A big question was raised in the report: how much Wirecard holds the interests of its shareholders? McCrum shortly published an article that reaffirmed the allegations made by the Zatarra report. This led to a catastrophic decline in Wirecard’s share price, slashing more than €1 billion off its stock market value.

Wirecard fiercely retaliated, essentially accusing McCrum of colluding with short sellers in share-price manipulations for the benefit of the latter who would gain significant profits from the downfall of Wirecard. Much to McCrum’s bewilderment, attacks also came from the public, most of which were under the presumption that McCrum’s investigative works were checkered with foreign bias against Germany. Any accusations against Wirecard were taken as a direct attack against Germany.

Amid a series of vicious back-and-forth attacks and counterattacks, McCrum and a fellow FT journalist, Stefania Palma, continued the investigation into Wirecard’s dubious operations, focusing on Asia, where the company had expanded its empire through acquisitions in the past years. With the help of whistleblowers, McCrum discovered how the majority of Wirecard’s global revenue and reported profits, most of which remained unaudited by the time of the investigation, came from only three of its alleged partner companies, Al Alam Solutions, Senjo, and PayEasy which were based in the United Arab Emirates, Singapore, and the Philippines respectively. Further investigations showed how these three “companies” were shrouded in mysteries. For instance, Dubai-based Al Alam, which allegedly contributed €264.6 million to Wirecard's sales in 2016, merely employed seven staff and was helmed by Oliver Bellenhaus, a Wirecard executive. In essence, these opaque companies invented a number of fictitious businesses, while Wirecard carried out all kinds of fraudulent acts behind its façade of legitimacy.

Even more bewildering is the findings of Wirecard’s top executive’s involvement in political hotspots; Jan Marsalek, the COO of the company, was allegedly involved in funding the recruitment of Libyan militiamen in his bid to influence the flow of the migration of Libyan refugees. A look at Marsalek's inner circle, where several foreign intelligence officials reportedly belonged, strongly suggested that Marsalek acted as an in-between for right-wing populist parties by capitalizing on the issue of migration. A Viennese himself, suspicion was rife that Marsalek was in cahoots with former Austrian chancellor Sebastian Kurz, whose conservative take on migration boosted his electability. It remains uncertain whether other Wirecard executives were aware of or involved in Marsalek's maneuvers in the political field.

Span over the years, McCrum's investigation into Wirecard ended in the downfall of the tech giant in 2019 and the arrest of its CEO (Marsalek remains a fugitive, with his last trace being detected in the Russian borders). Nonetheless, while his book managed to expose the collusion of fintech executives and irregular organizations, the high point of the downfall of Wirecard is not so much the unethical practices of high-ranking business executives as the blind support of the state. For years, the tech darling was endorsed and protected by regulators, financial institutions, and even state officials, with former German chancellor Angela Merkel continuing her support for Wirecard even after the first reports on the company’s illicit activities were released.

What is left undiscussed in the book is the awkward relationship between big companies and governments in today’s environment. Behind the initial widespread denial of Wirecard’s irregularities is a distorted sense of nationalism and misplaced trust in supposedly strong governments like Germany; the popular belief was that Germany's strong institutions, including its financial institutions, would not let large-scale fraud happen in the first place, while in reality, Wirecard took advantage of policy loopholes and market oversight by governments. The fintech industry is growing fast, and often governments lack the capacity to meet the ever-growing requirements in regulating the industry.

In the end, while the book offers an entertaining story, what with the involvement of foreign spies, terrorist organizations, and cross-countries chase, the story of Wirecard reads like enjoying Le Carre’s novels. Regardless, McCrum still leaves room for readers to take their own conclusions regarding the villains of the story. Is it only the greedy financial hotshots or the complicit regulators, auditors, and state officials supported by outdated institutional infrastructure?

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This article is featured in JUSTIN Development Review (JDR) December 2022 Issue