The former chief executive of Wirecard, Marcus Braun,
has been arrested.
Auditors revealed that nearly $2 billion
has gone missing.
This has been a wild ride for Wirecard.
You only need to look at the share price
over the past five days.
Wirecard is a payment processing company.
At their height they were worth 22 billion euros.
Wirecard was supposed to be Germany's ticket
into the high-tech world.
They were supposed to be the pride of German fintech.
Wirecard spectacularly imploded.
Its stock went to penny stock level and now it's worthless.
That is quite remarkable.
Never before has a company on Germany's DAX just gone bust.
Is there a corporate fraud going on here
or is it something more mundane?
The business model was fraudulent right
from the beginning.
It was bank robbery and investors and creditors
they're seeking more than 12 billion euros in repayments.
The two key players are two Austrians.
The chief executive, Markus Braun
and his deputy, Jan Marsalek.
Right now, Marcus Braun is in jail
and he's facing charges.
It's far more difficult to know anything about Jan Marsalek
because he's missing.
There is reason to believe that he had close ties
to secret services around the world,
so he had the means and obviously the money
to just vanish without a trace.
Might he be in Russia? Might he be in Asia?
Might he be on some deserted island? Nobody really knows.
He's on the most wanted list of Interpol,
but so far, nobody's been able to track him down.
The German economy mostly builds on car-makers
and engineering companies, which is sort of the past.
Wirecard was that bright new future-oriented company
and Wirecard promised that they would deliver
electronic payments and in the future
they would become a super big company.
They started as a startup, essentially,
around 2000 and grew up around the, you know, what some
people might find, slightly unappetizing businesses
of pornographic content and gambling
and then turned themselves into a main player
in the global payment facilitation business.
Markus, when you look at Wirecard's
share price, it's eye-watering.
The incredible acceleration
in the valuation of your business.
I think we are showing enormous growth,
I have no fear at all in terms of evaluation.
Starting in 2010, Wirecard's profits began to explode
and show a very, very solid
and almost too good to believe growth.
Wirecard at some point replaced Germany's second largest
lender, Commerzbank, and its market value of over 22 billion
was more than Deutsche Bank, the biggest lender,
and Commerzbank combined. Which showed the significance
and how things have changed in the German economy.
There's a chap called Jan Marsalek,
who was the chief operating officer.
There is another guy called Markus Braun, the CEO.
And while we know some elements
of what led to the fall of this company,
there were some elements that we didn't know about.
I met Jan Marsalek just for a background chat,
and he was quite frank about his youth,
that he was mostly interested in IT and programming.
I can only assume he was a classical nerd
when he was younger.
When he rose through the ranks at Wirecard,
he developed a taste for the extravagant.
He lived the life of a high roller,
looking back he spent more money
than what he was earning as a Wirecard executive.
Jan Marsalek was close to a commander
of a Russian mercenary army who took him to the Syrian city
of Palmyra right after that Russian mercenary army
expelled ISIL from the city.
He flew in there, he went to the beach
and fired around Kalashnikovs I was told.
He even took a small piece of an ornament back to Germany.
I saw it, I held it in my own hands.
Part of the Wirecard story that we've uncovered
is a little bit sort of boys' fantasies - you know
men in expensive suits and fancy watches, champagne parties.
Investors are impressed, Markus, by the growth.
If you look of the last 15 years your up 40,000 percent.
Interestingly, the collapse of Wirecard
starts around the time where Wirecard is at its peak.
And that is when they joined the DAX Index.
And that's really a huge achievement
to be among the 30 biggest companies of Germany.
At their height, its market value was at 20,
22 and a half billion euros.
The illegitimate part of Wirecard was, in large parts,
a business that happened far away from headquarters.
So these were businesses that were in Asia
or in the Middle East, businesses largely
where Wirecard had no sort of operating license
of its own and, therefore, relied on partners
to work with them.
Unknown to the public and wider audience,
Wirecard faked profits and transactions.
How did they do this?
They had a business that was called
third party providing business.
They did business with outside partners
that processed transactions in countries
where they had no license.
And these businesses provided Wirecard
with fake profit statements
and fake balance sheet statements.
Wirecard in reality didn't turn out a profit.
If you stripped the profits from the fake business
which provided fake revenue and profit statements,
it was unprofitable at least since 2016.
Basically the entire company was a smoke screen.
The trouble of the way Wirecard was set up
was that nobody, or very few people,
had a global overview of the company.
A lot of people knew a little sliver.
The auditors, Ernst & Young, for years,
signed off on their accounts.
And so there doesn't seem to be anything untoward there.
There didn't seem to be anything illegitimate,
but the questions kept coming,
particularly from the Financial Times
that started publishing reports around 2018
saying that there were problems with accounting in Asia.
And every turn Wirecard said,
"No, this is not true, this is legitimate."
They often would raise their forecasts
as to appeal investors
and they managed to wiggle out of this, time and again.
Let me ask about the scandals
that we've seen in the stock market.
I do not, too much, look into controversies.
In the Philippines, they had an account with two banks
on which about $2 billion were sitting.
It got from the bank fake balance sheet confirmations,
and this is how the entire smoke screen worked.
There did, however, come a point
around the time of 2019, 2020,
where they enlisted the help of a second auditor,
and that was KPMG.
And KPMG was asked for a special audit of the books.
They flew down to Manila
and initially nobody doubted the money was there.
They just wanted to see, can this be tapped at any time,
is this free liquidity?
What we now know is that a lot of this was fictitious,
that some documents were outright forged,
that some employees at these banks
were not who they said they would be.
Knowing now that this money never existed,
that obviously posed a huge problem for Jan Marsalek,
who was faced with a daunting task of coming up
with several hundred millions of euros
that he could transfer from Asia to Europe.
As we know, that never happened.
And that was sort of the beginning of the end of Wirecard,
as we know it.
The scandal that has been brewing
over the last week is now definitely deepening.
The initial employees said no money,
none of Wirecard's missing 2.1 billion
ever entered into the Philippines.
The company has temporarily suspended
its outgoing COO, Jan Marsalek,
but it seems there will be further questions
for the business to answer.
Jan Marsalek was suspended on June 18.
Marsalek went into Braun's office for one last time
and someone who happened to stumble into the room
said there were intense discussions.
Braun kept talking at Marsalek,
and soon thereafter Marsalek went missing.
We're looking at a space of a week,
from Marsalek existing Wirecard HQ
to Wirecard going up in smoke.
More details on this to come, but again,
a clearly unusual scandal.
In some ways, Jan Marsalek
is sort of a mirror image of Wirecard.
There is the visible, the legal part,
if you want, of Jan Marsalek,
which is he's the chief operating officer
of a large German company,
and then there is the murkier, opaque part of Jan Marsalek,
which is dealing with mercenaries, traveling to Syria.
There is one place where it's easy to get a sense
of who Wirecard and Marsalek was,
and that is this opulent villa
that sits in the middle of Munich.
This is a place where Jan Marsalek had his residence.
He didn't formally live there,
but he had all the fripperies that you might want.
I was granted access to the building
by someone who was authorized
and I developed my own little obsession of finding out
what was going on.
There's a room with some artwork,
but it also has that kind of appearance now of being a place
that was hastily and quickly abandoned.
Most of the furniture was removed from the place
but there was still two intensive care bed units.
In the basement, there was a huge locker
with drugs inside uppers, downers, stimulants.
Its quite extraordinary to have 2 billion
lost and not know where it is.
I was told that Marsalek and his gang
funneled out 1.5 billion of the company.
We know he milked the company dry
by transferring a lot of loans that the company provided
to entities that he then secretly controlled abroad.
Investors and creditors,
they're seeking more than 12 billion euros in repayments.
How can a error, a mistake,
a scandal of that size, happen in a DAX corporation.
We have many questions that we want to ask the government
in the following weeks.
These guys, these companies have auditors, right?
Is it time to audit the auditors?
The decline of Wirecard is obviously a huge embarrassment
for a lot of constituencies out there.
There are the auditors, who signed off
on these accounts for years.
And the question that's out there
and that remains unanswered is,
why did they not detect what was going on?
I mean, Ernst & Young is one of the big auditors.
They should know what's going on at these companies.
This company had all kinds of signs, reported by media
going back a year or two now
and yet people still gave the company the benefit
of the doubt, over and over and over again.
How did Wirecard get so much political support?
The prosecutors have for a long time
turned a blind eye on Wirecard,
and for the entire institution apparatus of Germany,
it is very embarrassing.
Investors, first and foremost, have lost out here.
And among the investors, spare a thought for Marcus Brown,
who was the biggest investor in the company
and he went from billionaire to now sitting in jail.
So quite a downfall for him.
Most people might not have too much sympathy,
but if we speak of losers, he's certainly among them.
Wirecard was fraud probably right from the beginning.
It's the biggest financial scandal in Germany.
And the amount of money that was lost,
it was probably the biggest bank robbery
that happened in this country.