Wirecard: when the fraudsters are bright Germans

[Lorence.xD]

I was about to call this a legislative failure, but it seems to me that it's more about the system being at fault for allowing something like this to happen.

Greece had a similar case where executives of a company made the market consider their company has an great value by claiming they had more store locations than in reality. The company (folli follie) was forced to restructure after posting inflated sales records and store locations. It took a foreign fund to send out reporters in order for this to be uncovered. Of course Greek stock exchange already didn't have a great reputation but this was yet another blow.

For Germany to have something like this happen, it shows that the current financial system is full of holes. When the entire system for the transaction of money and value is based on trust, things like this are bound to happen. What if in Wirecard's case the auditor had decided to just take a lump sum payment and continue being dishonest? Probably nobody would have found out for at least a few years. The losses could have even been blamed on something arbitrary in the end. 

In my opinion, this is not solely a case of legislative failure because the people that are involved are the higher ups of that corporation meaning that this was a case of corporate greed manifesting this fools, I do not know much about corporate life but everytime people reach that level, their greed are amplified to the point that they can't be content with what they are given. The loopholes in financial institution are something that the authority could fix easily but they do not because they are using it too if they are corrupt or they use that as a trap for fraudsters who think they can get away, the solution for this loopholes is not simple because there will be policies that will contradict or support the loophole and a tiresome politics will be dragging this thing until they just put it aside which is frustrating because the problem wasn't solved with all the years of equations.

[figmentofmyass]

that occurs to me as quite an exaggeration. the estimated losses in the enron collapse came to $74 billion---and that's in 2001 dollars, which were worth 45% more than today's dollars in terms of inflation. $4 billion is a drop in the bucket by comparison.

Apples and tomatoes. ~$74 billion was Enron's peak marketcap and it evaporated in the bankruptcy. Wirecard's peak marketcap was $28 billion if you want to compare to that, and it's around $0.15 billion at the moment. But I think it's highly misleading to treat share price pump as a loss.

IIRC Enron's creditors got about half of their money back.

fair enough. i was just basing that number on this: https://www.cnn.com/2013/07/02/us/enron-fast-facts/index.html

Its 2001 bankruptcy filing was the largest in American history at the time. Estimated losses totaled $74 billion.

a better metric would be what was actually recovered in the bankruptcy. with enron, creditors were supposed to get back 53% of $63.4 billion in assets = ~ $30 billion lost. smaller than $74 billion yes, but still much bigger than the 3.5 billion euro shortfall owed to creditors in this case---an order of magnitude bigger if we consider inflation.

[Lakai01]

How easy is it to burn $4 billion and pretend nothing happened? Well, it seems that it is actually very easy, even in a country like Germany, which should be an example and role model to other countries in the world. If this is possible in Germany, ask yourself what is being done in some other countries that have a far lower standard when it comes to financial supervision.

That surprised me too. Large companies here in Central Europe are subject to constant scrutiny by external firms, especially in the financial sector. I simply doubt that billions of euros can disappear here "just like that".

I also find it interesting that Wirecard has outstanding loans totaling 1.75 billion euros with renowned banks:

Accordingly, Wirecard has credit lines totaling 1.75 billion euros with at least 15 banks, of which some 800 million euros are still outstanding. The largest creditor banks include ABN Amro, Commerzbank, ING, LBBW, Barclays, Credit Agricole, DZ Bank, Lloyds, Bank of China, Citi and Deutsche Bank.

Translated to English from this source.

If you know how exactly such sums are checked when granting loans, it is remarkable that Wirecard was able to deceive the lenders to such an extent. Such verification procedures are absolutely no child's play. In order to obtain these sums, a high degree of criminal energy must be involved in order to simulate investment potential where there is none.

But the little man is warned against Bitcoin and co. ...