Coming to a screen near you, the Wirecard scandal

OK, let’s cut straight to the shameless plug for a forthcoming film. Skandal!, a Netflix documentary charting the incredible story of how the Financial Times’ Dan McCrum took down Germany’s huge and fraudulent payment processor Wirecard, is released globally on Friday. The film was directed by James Erskine and produced by Passion Pictures.

Everything is in there: the lying, the spying, the dirty tricks, the legal attacks, the disbelief across the entire Germany establishment, the gormless auditors and the comically incompetent regulators in Frankfurt. It’s easy to forget, but when presented with clear evidence three years ago that this supposedly heroic fintech growth story was in fact corrupt to the core, the Federal Financial Supervisory Authority, better known as BaFin, banned short selling in Wirecard stock and egged the Munich prosecutor to open a criminal investigation into the FT’s journalism.

The story is still playing out, of course. Markus Braun, Wirecard’s chief executive, will go on trial soon, as will other similarly accused executives, from Munich to Singapore. Meanwhile, Jan Marsalek, Braun’s operational right-hand man who fled on a private jet just as Wirecard imploded, was spotted recently in Moscow, where he now appears to be living quite openly despite also sitting on Interpol’s so-called Red List. That alone would seem to lend credence to a suspicion that a senior executive at a Dax 30 company was a Russian intelligence asset all along.

As McCrum continues to tour various conferences and corporate dining venues, recounting the seven years he spent bringing this criminal enterprise down, he’s sometimes asked whether he thinks Britain’s own Financial Conduct Authority would have let matters spiral out of control in the way BaFin did.

The short answer here is: well, yes, it did. With a substantial payment card-issuing business in the UK, and as the payment processor for a host of fintech start-ups in Britain, Wirecard was very much an FCA-regulated entity.

Thanks to an elongated German parliamentary inquiry into the affair we now have a rather detailed picture of life inside Wirecard in the years and months leading up to its collapse. Internal emails and messaging app records from all the main players in this financial drama have been subpoenaed by lawmakers in Berlin and promptly leaked. Well over one terabyte of data has been in the hands of journalists in Germany and the UK for some time.

As far as the FCA goes, it appears that a Knightsbridge security firm, Arcanum Global, working through Wirecard’s lawyers in London, Herbert Smith Freehills, was desperate to get the FCA to investigate claims that this newspaper was involved in trying to manipulate Wirecard’s share price for the benefit of short sellers.

The FCA is said to have been briefed by Arcanum operatives in August 2019, more than six months after the FT had begun to lay out clear evidence of fraud. Sending the FCA a steady stream of memos and documents, supposedly detailing the wide conspiracy allegedly under way against Wirecard, Arcanum continued with these antics until May 2020, just a month before auditors clocked that they’d been lied to for 10 years.

There is evidence in emails that the FCA was keen to talk to a senior executive, such as Braun, if and when he happened to be passing through London. But according to all the internal Wirecard emails, that’s about it in terms of British regulatory engagement ahead of the collapse.

Maybe the FCA was given false comfort by the involvement of a Magic Circle-grade law firm. Maybe they don’t read the FT much at the FCA.

Either way, one incident stands out. In September 2019, according to someone who was present, two unnamed FCA officials held a meeting at the Dorchester Hotel in Mayfair with Rami El Obeidi. He was once the head of foreign intelligence in the transitional government that ruled Libya for a period in the wake of Muammer Gaddafi’s death.

El Obeidi was said to be fearful for his personal safety and had two professional close-protection bodyguards with him at all times. Since he was reluctant to leave the hotel, the FCA guys spent two hours with him at the Dorchester as he laid out his fantastical tale of corruption at the FT. Red flag anyone?