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Wirecard and the Curious Case of the Missing $2 Billion | WSJ - YouTube
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- [Narrator] Wirecard,
an online payment company
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that was once the darling of
Germany's fintech industry,
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lost nearly $12 billion of market value
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and filed for insolvency just days
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after revealing a $2 billion
hole in its balance sheet.
[16]
- What's happening at
Wirecard looks like being
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one of the worst financial
disasters in Europe
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since the financial crisis.
[22]
- I mean, you have to stretch
back a long period of time
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to have an implosion of
this magnitude in Europe.
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- [Narrator] The missing
Wirecard money was supposed
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to be held in two trust accounts.
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The auditors investigating the company
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said they couldn't find it.
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- This $2 billion is
essentially equivalent
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to all the profits that Wirecard has made
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in more than a decade.
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- [Narrator] And everyone is wondering,
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where did that money go?
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- And nobody knows at the
moment whether it exists,
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whether it ever existed or not.
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- [Narrator] Here's what we know.
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Let's rewind and start with
what Wirecard actually does.
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- [Narrator] We're a
global fintech company
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with 20 years of payment experience.
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- [Narrator] The German
company provides software
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and systems that link
retailers, consumers,
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and the financial system.
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- So essentially what they do
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is they collect payment details
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from people who wanna buy stuff online
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or even in stores.
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They collect those
details from their cards,
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and then they perform
the role of confirming,
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settling, processing
that whole transaction
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when you buy anything online,
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whether it be a holiday,
some goods or services.
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Their background, a lot
of it was in gambling
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and pornography, or adult entertainment.
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- [Narrator] Over the years,
the company began to bloom
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as commerce shifted online
and away from cash payments.
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It attracted interest
from giants like SoftBank
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and Credit Suisse.
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Their stock grew almost sixfold
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between 2016 and 2018.
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But some have questioned
Wirecard's business model
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and whether the company was actually worth
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its market valuation.
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- I think it was around October 2015
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when I used to write a blog actually,
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and one of the readers
of the blog contacted me
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and said, "Have you ever looked
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"at this company called Wirecard?"
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And then I haven't.
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I had never heard of
Wirecard to be honest.
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- [Narrator] That's Matt Earl.
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He's a short seller,
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meaning he tries to make money
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by betting that a certain
company's share price will fall.
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In 2016, Earl published
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a report accusing Wirecard of malpractice.
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- The main accusation was
that they had probably
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been instrumentally involved
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in this processing illegal gamblings,
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US facing illegal online gambling moneys.
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- [Narrator] The company
denied those allegations.
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And Earl says he stopped
short selling its stock
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some years ago.
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Starting early last year,
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a new wave of "Financial Times" articles
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on the company's global operations
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led to Wirecard calling in
KPMG for a special audit.
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- This audit was supposed to demonstrate
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that a bunch of the business
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that people had said they doubted
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was really real.
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- [Narrator] But KPMG said it wasn't able
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to determine the answer to
some of those questions.
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- And one of the biggest questions
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was why there was a bunch of money
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supposedly in some trustee accounts,
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and whether that money was really there.
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- [Narrator] When auditors
went looking for the $2 billion
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of cash that Wirecard had
said was in two trust accounts
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in the Philippines,
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what they found was a gaping hole.
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Electronic scans of documents
confirming the accounts
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had been sent to Ernst & Young, but-
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- Its main auditor, Ernst & Young,
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finally said that these
documents weren't reliable
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and that they thought
they'd been deceived.
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- [Narrator] The Wirecard story then began
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to unravel quite rapidly.
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CEO Markus Braun stepped down.
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Wirecard said that the missing two billion
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probably didn't exist, and then-
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(speaking in foreign language)
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- What he stands accused
of is inflating the value
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of the company through feigning business
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with these third party acquirers.
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- [Narrator] Braun has
consistently denied wrongdoing,
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and his lawyers didn't respond
to a request for comment.
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The partner companies in question
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was supposed to process
payments for Wirecard
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in countries where it didn't
have full licenses to operate.
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But it couldn't be determined
whether they generated
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any revenue for the company at all.
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In a matter of days, the company had filed
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for insolvency proceeding,
citing over-indebtedness.
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Matt Earl, the short seller says
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even if he's not making money
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from Wirecard's latest woes,
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he's glad that people are starting
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to see the clearer picture.
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- Obviously, the more
pieces that you begin
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to put into the puzzle, the
clearer the picture becomes.
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- [Narrator] But there's
still a big question
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over whether or not that
$2 billion actually exists.
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Wirecard executives have
advanced two theories.
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- One is that the numbers
were completely made up.
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The revenue was never there,
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and that Wirecard was
simply trying to inflate
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the value of its business
in order to make it shares
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more attractive, in order
to borrow more money.
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And the other option
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is that some of this business did exist,
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but for whatever reason,
it wasn't really being done
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on behalf of Wirecard.
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And the money was never put
where it was supposed to be put.
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And in fact, it has been in all or in part
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taken by some other people somewhere.
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