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A Hot Startup and A Billion Dollar Fraud – Dan McCrum

A Hot Startup and A Billion Dollar Fraud – Dan McCrum

Real Talk: The Charles Mizrahi Show podcast

A Hot Startup and A Billion Dollar Fraud – Dan McCrum

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He followed a tip to investigate a hot new tech company … And what journalist Dan McCrum discovered was a world of criminal activity. With the help of a whistleblower, he uncovered Wirecard’s multi-billion-dollar fraud. McCrum joins host Charles Mizrahi to tell the fascinating story of his fight for the truth and Wirecard’s nefarious attempts to sabotage it.

Topics Discussed:

  • An Introduction to Dan McCrum (00:00:00)
  • Hiding in Plain Sight (00:1:52)
  • Wirecard’s Hunting Grounds (00:7:22)
  • The First Tip (00:14:40)
  • Approaching Wirecard (00:22:26)
  • Exposing Inconsistency (00:27:42)
  • The Whistleblower Report (00:37:33)
  • Wirecard Strikes Back (00:45:25)
  • All Is Revealed (00:50:58)
  • Where Are They Now? (00:53:59)

Guest Bio:

Dan McCrum is an author and award-winning investigative reporter at the Financial Times. His reporting on Wirecard has earned him a Gerald Loeb Award and prizes from the London Press Club, the Society of Editors and the New York Financial Writers’ Association. In 2020, McCrum was named Journalist of the Year at the British Journalism Awards. He writes about his Wirecard investigation in his debut book (below).

Resources Mentioned:

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Read Transcript

DAN MCCRUM: And he had discovered that, inside Wirecard, there was a guy in the finance team who had been cooking the books. Not huge, huge amounts. But the more they looked, the more they found.


CHARLES MIZRAHI: My guest today is Dan McCrum. Dan is a multi-award-winning journalist and author. His reporting for the Financial Times has been recognized with prizes from the London Press Club, the Society of Editors and the Gerald Loeb Awards. When Dan got a tip to investigate the hot new tech company challenging Silicon Valley, everything about Wirecard looked a little too good to be true. As he dug deeper, he encountered a story stranger and more dangerous than he ever imagined.


CHARLES MIZRAHI: He wrote about it in his latest book, Money Men: A Hot Startup, A Billion Dollar Fraud, A Fight for the Truth. It’s the astonishing inside story of Wirecard’s multibillion-dollar fraud — Europe’s biggest new tech darling revealed as a house of cards. I recently sat down with Dan and we talked about the inside story of Wirecard’s multibillion-dollar fraud and how we uncovered that Europe’s biggest new tech darling was just a house of cards.


CHARLES MIZRAHI: Dan, thanks so much for coming on the show. I greatly, greatly appreciate it. And I want to tell you, I really am looking forward to our discussion today, because I remember getting the FT — the Financial Times — and seeing your articles, where you were talking about a fraud of … Well, you first asked questions about it. But I do remember following this in the FT as well as in The Wall Street Journal, and it’s just a really exciting story. And thanks so much for coming on the show.


DAN MCCRUM: Well, thanks for having me on, Charles. It’s a pleasure.


CHARLES MIZRAHI: OK, folks, the name of the book is Money Men: A Hot Startup, A Billion Dollar Fraud, A Fight for the Truth by Dan McCrum. And this really is a fascinating story because a single guy, an FT journalist — by the name of Dan McCrum, who’s right here with us — he brought down a company that was, what did you say, €28 or €30 billion?


DAN MCCRUM: I think it was about €28 billion at the peak.


CHARLES MIZRAHI: So call it a €30 billion company that was built on fraud, manipulation and just a great story. And the executive team stole, I think it was … what, €1.9 or €2 billion was missing?


DAN MCCRUM: Yeah, €1.9 billion. They had to suddenly admit: “Oh, yeah, that money doesn’t really exist anymore.”




DAN MCCRUM: And in America, they stole at least €1 billion.


CHARLES MIZRAHI: Yeah. What fascinates me, before we get into this, is that this was hiding in plain sight. It was a public company trading in Germany on the DAX. Public company, so they filed filings, they had offices, they had everything that any major company would have. And it took a guy like you, with a couple of good steers by smart people in the right direction, to work at bringing down this company for the fraud that it perpetuated for close to … what, would you say 20 years or so?


DAN MCCRUM: I mean, the fraud was going on for at least 10 years. But yeah, the company had been around for 20 years. And I think the best way to think about it was like Europe’s PayPal.




DAN MCCRUM: That was the way they pitched themselves. They were in payments. It was fast growing. It was exciting.


CHARLES MIZRAHI: Okay, good. So, you know what? Let’s do this. Let’s start from the beginning, right? Because many Americans don’t know about Wirecard, what they did, what business they’re in. By the way, there was an article in The Wall Street Journal, I remember front page, I think it was, about Wirecard. It was a pretty big deal, was it? That was your article, I think. Did you write that?


DAN MCCRUM: Oh, no, I didn’t write for the Journal. I wrote for the Financial Times only. But yeah, I think the Journal did cover it as well. It was a pretty big deal.


CHARLES MIZRAHI: It was a pretty big deal.


DAN MCCRUM: It all blew up.


CHARLES MIZRAHI: Right. And what fascinates me, Dan, is I’ve had other people on the show who — one was Key Man, which was the story of Abraj, how they went ahead and told the whole world that they were going to solve poverty by building businesses, and they took money from the U.N. and they took money from Bill Gates, and they all got snookered. They all got snookered. It was all a sham. And it just amazes me how fraud can be perpetuated for such a long period of time. Hiding in plain sight.


DAN MCCRUM: It’s kind of a timeless story, isn’t it? I mean, there’s always the people who are suckered in by the promise of something which is too good to be true. How many times have we seen that? And the big corporate frauds, you saw it with Enron. And, you know, there are shades of Theranos as well here. I mean, the chief executive in this case also like to wear black royal top jumpers, trying to imitate Steve Jobs. When you think about the things that they have in common, these big frauds, they spin a great story. And then it works and people get rich and they become invested in the success. And that sort of blinds you to the questions that you should be asking.


CHARLES MIZRAHI: Yeah. It’s not only the questions that … Well, yes, definitely the questions you should be asking. But the social proof of it, that everyone looks around and says: “You know what, they’re public, they filed, they have a great accounting firm, they have all the credentials needed. Look, if they say these are the numbers, I’m not going to question them.”


DAN MCCRUM: Exactly, there’s shades of Enron to this as well. The company was much loved by stock market analysts and people made a lot of money. And you start to think you’re pretty smart when you’ve made a bunch of money from a great stock trade. So, you buy some more and you tell other people to buy it.


CHARLES MIZRAHI: What continues to amaze me about these types of frauds is that they go on, not only for the magnitude of the money they extract from investors in the marketplace, but the length of time. These aren’t a year kind of things. These kinds of things go on for years. And you look back and you see all the red flags. But going through it, it takes a few people to shout out: “The emperor’s naked.” And still, people — investors — kind of poo-poo it away.


DAN MCCRUM: Yeah. I mean this is the extraordinary thing about Wirecard in this story, because we hear a lot about dirty money at the moment. There’s a lot of dirty Russian money that’s been coursing through London. And Wirecard was the example of what happens when dirty money comes for you. And so, this wasn’t just a case of someone going: “Hey, the emperor’s got no clothes,” and everything collapsing. This was a case of a modern financial institution using every tool that it had, as well as some that most don’t have — including spies, hackers, private detectives, lawyers — to intimidate and bat away criticism. So, I think there was a very real chance that they would have got away with it. That’s the crazy thing as well, in these markets.


CHARLES MIZRAHI: Yeah, 100%. So, let’s start from the beginning. Wirecard was a payment processor. And a payment processor — you definitely chime in here — is really the grease that works through the financial system. They process payments when I swipe my credit card. What happens from there?


DAN MCCRUM: That’s a great example — the grease in the system. You swipe your credit card and they get the money from your bank to the bank of the merchant — the person who’s telling you something. And really that’s very simple. You know, if you get into the nuts and bolts of it, it’s a slightly complicated process. But it’s just simple as that. They get your money to the person you’re trying to pay. And that’s a fairly straightforward business and loads of people around the world do it.


DAN MCCRUM: And the thing that Wirecard did, though — which was very clever and we see this a lot — they didn’t brand themselves, first and foremost, as a bank or a payment processor. They were a technology company. And they were saying: “Hey, we’re using technology to make the business of payments smarter and faster, and we can do all sorts of clever business around that. And that means we’re going to be more profitable and we’re going to grow faster than everyone else.”


CHARLES MIZRAHI: It’s like We Work saying: “We’re a technology company, and all they were doing was subletting space.” So, if you put a nice spin on something — wow, that’s what they are. But really, the business is a pretty sane, really safe business in a sense. You’re facilitating the payment between point A and point B. For that, you’re taking out a small percentage, a couple of percentage points. And also, you’re really, in a sense — to the bank — you’re responsible for making sure that there’s no fraud on that end, meaning people aren’t using that credit card or your system in order to make payments and get away with it, and chargebacks — where a customer says: “I never ordered it,” the card was charged and the money was already deposited in the account. That’s what a payment processor does. In the real world, it’s a pretty simple business. Agreed?


DAN MCCRUM: Yeah. Visa and MasterCard will license a whole load of these payment processers. They’re called acquirers, if you want to know the jargon. And so, when you call up your bank and say: “Hang on a second, I don’t recognize this credit card payment,” and they give you the money back. Wirecard was one of these payment processors who was responsible for getting that money back for you.


CHARLES MIZRAHI: Right. So, that’s why it’s very important when they sign up. I know in our business, when we sign up with newsletters, payment processers go through a whole bunch of questions to you — and background checks — because they’re on the hook for the money. If they pay you, and all of a sudden, a zillion customers want to charge back and call up and say to the credit card company: “Give us back our money,” and if I disappear, they’re not getting their money.


DAN MCCRUM: Yeah. And so, that turns out to be quite an important cog in the whole payment system, right. Because if your payment processor is doing the right checks to make sure that you are aboveboard and upstanding and you’re not laundering money. But if you’re, say, a bit of a criminal company, and you’re prepared to process payments for all sorts of characters, then that is a bit of an interesting opportunity for the payment processor. And that’s where Wirecard came from. It came from doing the sorts of business which other people didn’t wanted to do. So, it did a lot of porn, a lot of gambling.


CHARLES MIZRAHI: Right, pornography and gambling are two areas in the payment processing business where … Let’s say, a regular business, they charge a couple of percentage points for the transaction. So, folks, that means if you’re swiping for a $500 product, the payment processor is getting 2% or so or $10. Not a lot. But do this multiple times, it’s a lot of money that they’re getting. And businesses, anyone owns a business and uses credit cards as a means of getting revenue, sees at the end of the month a huge statement. Those dollars add up. And certain businesses, they charge really high rates — 8%, 9%, 10% — such as pornography and such as gambling, right? They charge a high percentage on each transaction.


DAN MCCRUM: Yeah. And there’s reasons for that. Because pornography and gambling are risky businesses. There’s a much higher chance that you’re going to see that statement on your credit card — or your wife or partner is going to see that and go: “What’s that?” And you’re like: “Oh, no, I don’t know anything about that. I’m going to call up and cancel and complain.” Or you might say: “I was ripped off at the online casino.” Not to mention some of the legal implications, like gambling isn’t legal in a lot of countries.


CHARLES MIZRAHI: Right. So, this is the hunting grounds that Wirecard went after. They went after those in the shadows of the businesses which have a hard time getting payment processors. They hung around with a lot of bad elements, did this business, said how profitable it was. And what was their spin on it? What were they basically telling the world?


DAN MCCRUM: So, that’s the thing. They weren’t telling the world about any of this. So, they had their roots in the grimy, profitable business. And if you asked them outright, they would say: “Yeah, sure, we do a little bit of that, but we’ve moved beyond that. Most of our business is very respectable. We’re doing consumer goods.” Wirecard processed payments from big grocery store chain, Aldi in Germany. Every time they got a new customer, they would put out a press release: “Hey, we’re processing payments for Orange, the mobile phone company,” or things like that. And also, they would say they were doing a lot of airlines — again, a risky business, because if an airline goes bust, hey, you’ve sold a lot of tickets and suddenly all those people are going to want their money back. And so, it said it was doing that sort of business, but it was doing it very cleverly because it had the great technology. And it could do this better than its competitors. And so, it was growing reliably 20% or 30% a year.


CHARLES MIZRAHI: Which is astounding, if you think about this business. It doesn’t grow at that kind of rate unless you have everyone on planet Earth processing through you. The growth is just not in that business. It’s a pretty mature business, agreed?


DAN MCCRUM: Well, it’s one of those ones … Yeah, you’re right. It’s really unusual to grow, but it’s one of those competitive businesses where if you throw money at it, you can win a lot of customers and grow very quickly. But you’re going to lose money doing it.


CHARLES MIZRAHI: You won’t be profitable.


DAN MCCRUM: Yeah, you weren’t being profitable.


CHARLES MIZRAHI: So, they had both ends of the barrel taken care of. They were growing their revenue at an enormous rate and growing profits — which didn’t make a whole lot of sense knowing what business they were in.


DAN MCCRUM: Yeah, exactly. And so, when I first came across them, I didn’t know any of this. What happened was, I was a journalist at the Financial Times in London. And I was looking for companies whose numbers didn’t quite make sense. Basically, I wanted to find myself the next Enron. And I was looking for a bunch of small companies in the U.K. who turned out to be accounting frauds.


DAN MCCRUM: And so, I started to chat to short sellers. And I was talking to one of these, an Australian guy called John Hampton, who likes to spin a tale. And he knew the sort of companies that I was interested in. And so, we’re chatting one day about this and that, and he suddenly goes to me: “Hey, Dan, would you be interested in some German gangsters?” I’m like: “Yeah, that sounds great.” And so, he tells me about this payment processing company called Wirecard, and it’s worth about €4 billion at the time. And that was when I started to learn all this about payment processing.


CHARLES MIZRAHI: So, you didn’t know anything about accounting? You’re not a financial guy. You’re not an MBA. You’re an investigative journalist, right? You follow where the trail leads and you learn along the way.


DAN MCCRUM: Yeah, exactly. You learn by doing. The key to being a good journalist is you don’t have to know everything. You just have to find sources who do know at least something about it. And then you ask them.


CHARLES MIZRAHI: Right. And I have to say, I’ve been a subscriber to the Financial Times for a long, long time. And your paper is just … I love it, especially Lex, which has really smart people write 200 to 300-word essays on a company, on earnings, on something, and I always get a good idea. So, folks, the FT is an orange-looking paper and…


DAN MCCRUM: We call it salmon pink. It’s the one which is a funny color.


CHARLES MIZRAHI: Funny color, but I want to tell you, they really have outstanding, outstanding journalists. These guys are really good. So, that’s my two-second plug for FT.


DAN MCCRUM: Start with the weekend section. It has a lovely magazine about things you can buy.


CHARLES MIZRAHI: The weekend sections is great. Everything really about the F.T I like. So, you now are pointed in the right direction with this German company run by gangsters. What year is this, about?


DAN MCCRUM: So, this is October 2014.


CHARLES MIZRAHI: OK, October 2014, you all of a sudden get this scent. Someone, a short seller … Now, I want to just point out here, short sellers, folks, do not put companies out of business if they don’t deserve to be. So, you could be a short seller against Google. And no matter how big a short seller you are, you will get hurt. You will lose money. Because Google is a reputable company with real money. Short sellers make their money off of frauds or companies which say that they’re X and they’re really much less than that.


CHARLES MIZRAHI: If the story is not real, a short seller will have an extremely hard time — if not impossible time — to just break even. But if the story is real, short sellers can make a whole lot of money. And they’re extremely, extremely important for the financial ecosystem. They’re the, let’s say, hyenas — which go after the weak in the marketplace that look to deceive. And without short sellers, you could have people like Wirecard and a whole bunch of other unscrupulous dealers and CEOs bid up their stock forever if there’s no mechanism to bring that back to Earth.


CHARLES MIZRAHI: So, I don’t want to get any comments or calls — I mean, you can still do it — saying: “Oh, short sellers bring down…” They don’t bring down companies. You can try to sell short Berkshire Hathaway or Microsoft. They’re not going to do anything. You’re going to be pissing in the wind. It’s not going to mean anything. Companies which go down and go down hard, usually if there’s if there’s smoke, there’s fire. And if there’s smoke and it happens to be no fire, the company will rebound. So, short sellers do not have the kind of magical power that many people think they do if the story is unreal. If the story is real, the rest of the marketplace will destroy it. So, I just want to cover that.


CHARLES MIZRAHI: So, you get pointed in the direction of a company that something’s up. What’s your next step?


DAN MCCRUM: So, I jot down the name Wirecard like: “I should have a look at this.” And John tells me a little bit more about it. So far as he’s concerned, he thinks it’s a fraud. But also, he thinks it’s processing payments for all the bad stuff online. He can’t prove it. But, you know, dark web nastiness — you can imagine. But he doesn’t have any proof — because John’s the sort of short seller who shorts a whole bunch of companies — and he finds enough to convince him, and that’s it.


DAN MCCRUM: But a couple of months later, another short seller gets in touch. And I like what you were saying about the short sellers, though, because they’re much misunderstood. And this is something that Wirecard used to its advantage later. So, I get a call from this guy called Leo Perry and I go and meet him for a coffee. And he’s very unassuming — you know, classic hedge fund manager, cashmere jumper, slightly nerdy manner. And he pulls out these typewritten notes and sort of starts going through them. And he’s almost academic. You meet these investors who get so into the detail. And what he really likes about frauds is if you’re a short seller and you find a fraud, then you can get a real confidence that something’s there that you can’t with … If you’re trying to guess how many cars is Tesla going to sell, that’s a finger in the air kind of stuff. But if you can go: this company’s a fraud, then you’ve got a good chance that at some point the share price just goes all the way to zero. It’s worthless.


DAN MCCRUM: So, what he lays out is he says: “I think Wirecard has been inflating its profits.” And the way they’re doing it is with a bunch of dummy companies in Asia. And what they do is they buy these companies and they’re not really worth what they say they’re worth. And they use all sorts of accounting trickery. You know, when you’re buying a company, you can make things go away in the wash. It gives you lots of opportunity to juice things if you’re a bit unscrupulous. And he laid out this sort of trail of paperwork that he found in Asia saying: “This looks like a fraud to me.” So, I go away and I have to repeat his work. I go and get all the paperwork and I follow it through. And I start looking and going: “Yeah, I think he’s really on to something.”


CHARLES MIZRAHI: And by the way, let me just interject here, Dan. This is all publicly available information. You don’t have really anything that was proprietary or that someone from the inside gave you, or anything to that effect. Is that more or less correct?


DAN MCCRUM: Yeah, the amazing thing is you had to go looking for it. You know, in some of these filings of their little subsidiaries in Asia, they weren’t easy to find, but they were there. They were public. There was nothing secret about that. And he just did something very simple. He compared what was in those filings to what Wirecard was saying in public. And the two things didn’t match. So, I approach the company, I start know saying … And to begin with, you know, you come in gently when you’re doing this sort of work, you don’t walk straight in and go: “Hey, are you fraudsters?” That doesn’t go down well.


CHARLES MIZRAHI: You need to romance first. You need to romance them — you’re a great guy, great CEO, you’re amazing, you walk on water. How do you do it?


DAN MCCRUM: Exactly. But one of the funny things is … So, I approached Wirecard. And normally, fast-growing, young tech company — and the Financial Times comes to want to talk to them — they’re like: “Hey, yeah, let’s put our chief executive on the line. Let’s have a chat.” Wirecard was the complete opposite. They’re like: “Oh, no, it’s very difficult. Oh no, we’re doing our results at the moment. Maybe you could come here and talk to some minor manager.” So, that goes nowhere. So, I send them a bunch of questions about their accounts — and quite detailed — and suddenly their tone changes. And they’re like: “So, you in league with short sellers?” Basically saying, am I corrupt or am I naive? And that’s a big red flag.


CHARLES MIZRAHI: When you have nothing to nothing to hide, the media is there for you to use as a great platform to send your message. But when you have something to hide, and the first thing is you’re being accused of being a short seller, that’s a big red flag.


DAN MCCRUM: Yeah. Big red flag. So, we carry on talking to them and eventually they do put the chief executive on the line.


CHARLES MIZRAHI: What’s his name?


DAN MCCRUM: Marcus Brown. And he’s painted as the founder of the company. At this point, he’d been running it for almost 15 years. It went public in about 2006 — a tiny valuation. But, you know, it’s one of those penny stocks which just keeps doubling, then doubling, then doubling. And so, I talk to him and he does all the classic things which liars do.


CHARLES MIZRAHI: What are those classic things?


DAN MCCRUM: So, if I said to you: “Are you stealing money?” You’d be like: “What are you talking about? I have never stolen anything in my life.” You give a very clear blanket denial. What liars do is give very specific denials. So, you would say: “No, nothing was stolen on that day.” Or he would take refuge in … You don’t answer the question. What he said was: “Why would I do these things? I’m a very successful businessman. I’ve been running this company. I own a big part of it. All these analysts think I’m great. Why would I risk all that by trying to fake the numbers?” And the funny thing as well was the tone was strange, like he didn’t get angry. I basically flat out asked him: “So, what’s going on here? Are you juicing the numbers?”


CHARLES MIZRAHI: Imagine if someone came up to you and basically called you a cheater and you’re stealing money. You know, I’d punch you in the nose. That’d be my first thing. To sit there and carry on a conversation with you and try to answer a whole bunch of other questions … You just insulted the guy, and if he has nothing to hide, like, how dare you? What are your facts? But you don’t get that. You don’t get that, right?


DAN MCCRUM: Yeah. And by the way, that’s one of the great fun things about being a journalist, is that you occasionally get to ask people very rude questions like that and they sort of have to put up with it. But I do the whole like rude question routine….


CHARLES MIZRAHI: And this is when?


DAN MCCRUM: This is December 2014.


CHARLES MIZRAHI: OK, December 2014. So, two months or so since you got the tip from the short seller that something fishy is happening at Wirecard.




CHARLES MIZRAHI: And at this time, they are still the darlings of the investment community, especially in Germany. And the stock is just having a field day. Go ahead, continue. I’m sorry to interrupt you.


DAN MCCRUM: So, as far as everyone can tell, very successful little fintech company. And he starts explaining to me in a tone of like: “Do I really have to tell people this again? No, we’re not a fraud. No, we’re just a misunderstood company.” It’s like he has to do this all the time, to explain that he’s not a criminal. And they explained away all the technical questions and, you know, they had answers things because they’d had time to prepare. It’s actually one of the things I always remember Carson Block, the short seller, telling me is: “Management can always come up with a lie if you give them enough time.” And so, they explained it all away. I was kind of left with a bit of a problem, like, how do I even write the story? And in the end, I wrote sort of a bunch of blogs for the FT.


CHARLES MIZRAHI: Hang on, before that … You do that in April. That’s your first one, right?


DAN MCCRUM: Yeah. Sorry, I jumped ahead.


CHARLES MIZRAHI: This, I think, is crucial because before you even write it, you have to go through a whole bunch of hurdles with your legal team. Because you’re going to call out a multi-billion-dollar company —or multi-billion euro — that is the darling of the analysts of the financial community in Europe. And you’re calling these guys out for fraud. That’s a big, big, big accusation. Because even if it’s not fraud and you’re totally wrong, you caused some reputational damage to the company and the paper can be liable. Right?


DAN MCCRUM: Yeah. And over here, we have some pretty strict libel laws as well. You can get in a lot of trouble.


CHARLES MIZRAHI: Right. OK. So, now you meet the you meet the CEO. You meet Marcus, right?


DAN MCCRUM: Yes. I meet Marcus, we have this phone call for about two hours. So, I do this long interview and dutifully write down all the things he says about this very complicated, interesting business of his. And I sort of go away and I try and turn this into a story. But the lawyer basically says to me: “Well, what evidence have you got?” I said: “Well, it looks a bit fraudy. Everything smells.” But there was no smoking gun. There was nothing I can point to. So, he said: “You definitely can’t use the word fraud because that will get us sued to oblivion right away.” So, he suggests that I present this as a puzzle to the readers. You know, why is Wirecard like this? Why does it do these funny little deals? And so, I wrote basically a string of stories saying: “Something about this doesn’t quite make sense. The numbers don’t quite look right. What could be going on?”


CHARLES MIZRAHI: So, you don’t have any smoking gun yet. You have a good idea that something is going on, but you don’t have any proof, right?


DAN MCCRUM: Yeah. And I go back to Leo Perry with some ideas. Because people start reading the stories and saying, hey, maybe this, maybe that. And we come up with a whole theory that this is how the fraud is working. This is the big sign that says, I think some of these sales are fake. But again, to be honest, there were some quite dense technical stories, which probably I could have written to be a bit clearer with the benefit of hindsight.


CHARLES MIZRAHI: Okay. What hurdle do you have to go through for this first story that you have on FT Alphaville of “The House of Wirecard” — which they finally allow you to publish, after going through legal, on April 27, 2015, which really starts the ball rolling.


DAN MCCRUM: So, that one I have to get it signed off by the lawyers and by my editor, Paul Murphy. And that signals to the world: I’m interested in the story. And maybe there’s something a bit fishy going on with Wirecard. And that’s what starts to generate a little bit more interest.


CHARLES MIZRAHI: Gotcha. So, you put out this first story, “The House of Wirecard.” What happens then?


DAN MCCRUM: So, I wrote a bunch of stories. They raised some issues, promising some attention for the company. And people like hedge funds like them, accounting nerds like these stories. But really, in terms of the wider impact, nothing much happened. But it prompts a couple of short sellers to go away and do some more work. And then, they suddenly pop up with this new theory. So, I’ve been focusing very much on the accounting fraud. And these short sellers go away, and they become much more interested in the money laundering side of things. And they start finding all this evidence — they think — is saying, hang on. Basically, when online poker got outlawed in the U.S., all the other payment processors said: “Oh, no, we’re not going to carry on doing that because that’s now flat out illegal.” But Wirecard carried on. And so, it was basically laundering money for these online poker players.


CHARLES MIZRAHI: Right, Wirecard is pretty clever. They say that poker really doesn’t fall into the gambling classification because it’s a game of skill. Right?


DAN MCCRUM: Yeah. So, this is one of the big debates that was going on. Is it a game of skill? In which case, hey, maybe it’s legal. Or is it online gambling? In which case, no. Congress definitely said you’re not allowed to do that. So, I get approached by these short sellers saying: “Hey, we’ve done this big report and we’re going to publish it. And it’s going to finally expose the truth about Wirecard.” So, I’m going to have to admit, I got a little bit overexcited at this point.


CHARLES MIZRAHI: What year is this?


DAN MCCRUM: So, this is February 2016.


CHARLES MIZRAHI: OK, 2016. We’re still a long ways. We’re still another four more years until this comes to … So, you already put up a flag. You hoist the flag and say: “Red flag, something’s wrong with this company.” And at the same time, the company defends itself. The stock price continues to rise, profits and revenue continue to soar. I think there were about a couple of billion dollars when you started this process and now it’s in the tens.




CHARLES MIZRAHI: By February 2016 … Wow, even earlier than that, you’re looking at €4 billion. The share price continues to rise and keeps going higher and higher. So, you now find more and more and more information. Why don’t you think: Why is the stock price continuing to go up?


DAN MCCRUM: So, Wirecard just waves it away. And they keep doing more of these deals, which their investors love. So, they go and announce they’ve bought this big payments business in India. And, you know, they don’t really focus on the details of the business. They spend the whole time going: “India’s a really big country, and it’s growing really fast. And by the way, it’s modernizing really quickly. So, payments is going to be a really big part of that growth. So, that’s what we’re doing. We’re sticking our flag in India and it’s going to be great for us.”


CHARLES MIZRAHI: But what they’re really do is buying these payment processing companies, which really are nothing more than, I don’t know … A lot of them are paying enormous amounts of money for stuff that is worth nothing or pretty little. But it gives them a beachhead in order to start their press machine.


DAN MCCRUM: And the amazing thing about it, it’s because payments is intangible. So, by this point, people are suspicious. They go and look for some of these businesses Wirecard is buying. But the problem is, even if you knock on the door and say: “This doesn’t seem like a very big business, you don’t have many staff here.” Wirecard is like: “Well, we’re doing all this great business. You know, we’re processing lots of payments and it’s digital. You just can’t see it. It’s all flowing through the ether. And our auditors, Ernst and Young, they’ve checked everything and it’s all above board. So, you’ve got nothing to worry about.”


CHARLES MIZRAHI: So, how are the auditors signing off on that?


DAN MCCRUM: So, this is a very good question. What I learned as I was writing the book is that, I think if you’re an auditor, you invest a lot of time and energy to learn a lot of complicated things. And so, there’s this moment later on with Wirecard where there’s a whole lot of suspicions being raised. There’s another accounting firm is being brought in to check their work. And even some people inside Wirecard are going: “I’m not really sure about all of this business. Does this all really make sense, what we’re telling the world?” And one of the Wirecard guys in that meeting tells me — E.Y. stands up and says: “Yes, we really understand Wirecard’s business. We realize it’s not the tidiest, they’re not really strong a procedure. But, you know, it’s a fast-growing company. We understand the growing pains of startups, and I think we’ve got a grip on how all of this works.” And they seem to think they understood the business better than Wirecard’s own staff. And so, the most optimistic theory I can think about what went wrong is they basically became captured. It was like an intellectual bias where you’re like: “I’ve done all of this work. I’ve really understood the business and I’m the one who gets it.”


CHARLES MIZRAHI: When do the wheels start to fall off?


DAN MCCRUM: So, for Wirecard, the big moment is September 2018. It enters the DAX 30, and it replaces this staid, old investment bank called Commerzbank. And it’s kind of hailed as the next big thing. And I think the thing to understand here is Germany’s got loads of amazing manufacturing companies. You know, BMW, Daimler, Siemens. If it’s been bashed out of steel and it’s highly engineered, Germany is excellent at it. But it doesn’t have a lot of big tech companies. So, Europe in general looks at the west coast of the US and it looks at Asia and goes: “Where are all our tech companies?” And along comes Wirecard and says: “Hey, we’re a technology company and we’re going to be involved in the arrival of the cashless society.” That was its big pitch. We’re going to stop using notes and coins.


CHARLES MIZRAHI: Once again, it’s a great story — fintech and the rise of apps, and we’re not a cashless society. All the buzz words, the credibility of being part of the DAX 30, a history of ten plus years, big name accounting. It had all the trappings to suck everybody in.


DAN MCCRUM: And it’s a really simple story as well, isn’t it? We’re all going to stop using cash money and start using digital payments. And you know, they talked a good game about using artificial intelligence as well — all of that good stuff does work. So, at that moment, it’s the company’s moment of triumph. It’s one of the 30 biggest listed companies in Germany. And about a month later, I got an email into inbox from a would-be whistleblower. And it says, would I be interested in wrongdoing at a big financial company? Doesn’t say anything about who it is. And this is one of the amazing things about being a journalist. It can be a clear blue sky. And suddenly, someone turns up with a tip. And they had seen the stories that I’d written about Wirecard previously and decided that I was the person to get in touch with.


DAN MCCRUM: So, I get on the phone and it turns out the person who got in touch isn’t the whistleblower themselves, it’s the whistleblower’s mother. And so, her son is a lawyer who had been working at Wirecard in Singapore, which is its Asian headquarters. And it turns out, he had been forced out. And he was busy looking for a new job. He wanted to get on with his life. But she knew everything that had happened to him. And she was determined that Wirecard was not going to get away with it. And so, she started getting in touch with journalists. And I responded. And when the guy — his name is Pav Gill — when he found out, he was like: “Mum, what have you done?”


DAN MCCRUM: But the thing was, he was also angry. Because he had done his job. He was sort of general counsel for the whole region. And he had discovered that inside Wirecard, there was a guy in the finance team who had been cooking the books — not huge, huge amounts. But the more they looked, the more they found. And he’d been backdating contracts, faking invoices, doing weird little schemes to move €2 million from one country to another. And that’s a serious thing. You know, someone sending €2 million out of the company on bogus reasons, you would expect them to do something about it. And so, he and his colleagues, they hire a law firm. They do a quick investigation and they realize more money is about to go out of the company.


DAN MCCRUM: So, they send everything they found to head office in Munich, basically to a big presentation going: “These guys are crooked and we’ve got a real problem on our hands here.” And in Germany, they say: “Oh, thank you very much. Thanks for telling us about this. We’ll take over now.” And very quickly, he realizes that nothing’s going to happen at all. And all the guys under investigation seem to know about it. And his position quickly becomes untenable and he’s forced out. And that was the moment when his mum gets in touch.


DAN MCCRUM: And so, I fly to Singapore and we have a couple of clandestine meetings. I go to meet him in the lobby of a hotel. It looked like the inside of a starship — one of those weird Singapore business hotels, no natural light whatsoever. And so, I sit down at about 10:00 in the morning. And at this point, I’ve been looking at Wirecard for years from the outside. And suddenly, I’ve got a guy on the inside and he starts telling me how it all works. And he starts sketching out org charts and people’s names. And it’s all incredibly complicated. But slowly, he just starts telling me this incredible tale. And the thing is, it wasn’t just his word. Because when they fired him, they didn’t escort him straight from the premises. What they did is they basically told him to see out the week. And in that bit of time that they gave him, he took a little hard drive into work and copied all the files from this internal investigation. And that was what he had to give me.


CHARLES MIZRAHI: And so, you publish on January 30 in the FT, “Execs at Wirecard Suspected of Using Forged Contracts.” And what happens after that article?


DAN MCCRUM: So, the first thing that happens is Wirecard says: “This is completely not true. No basis to it whatsoever.” And we’re like: “Brilliant.” That’s the most stupid thing they could say because we’ve got loads more evidence and they’ve just given us a really good justification to publish it. Because one of the surprising things about doing this sort of work is how hard it is to publish these stories. Because I had loads and loads of evidence, but because it had been conducted by lawyers, it’s something called legally privileged. And so, there was a big question about, well, do we have a good justification to publish all that stuff? By immediately lying and saying: “No, none of this is true,” they gave that to us.


CHARLES MIZRAHI: There you go. So, you publish this article. I do remember reading this because this when you write the word “fraud” and you name the company, it’s game over. You’re all in. The missiles are flying. There’s no turning them back now. You just accused this company of being a fraud.


DAN MCCRUM: And so, the value of the company drops by about €8 billion pretty quickly.


CHARLES MIZRAHI: It was around 30% or 40%, if I recall.


DAN MCCRUM: Yeah, it dropped to that sort of order of magnitude. And so you’re like, blimey! OK, that’s quite a big deal. And then something weird happens. The company says it thinks market manipulation has been going on. And you’re like: “OK, fine. That’s kind of weird.” And then an investment bank puts out an analyst report saying: “Oh, yes, this is clearly — the Financial Times is in cahoots with short sellers and this is that criminal, Dan McCrum.” And I thought it was a joke. But it turns out what the company did is — faced with this big reveal of what had been happening in its Singapore office — it decided the best thing to do was say I’m in league with short sellers and I’ve done this to try and manipulate the share price.


CHARLES MIZRAHI: Right, selling the stock short and hoping the share price would plunge. Therefore, you could buy it back at a cheaper price and make a boatload of money. And that’s what they’re accusing you of. I don’t know what your policies and procedures are in your company — at FT — but I believe something to the extent you cannot investigate or buy or sell stocks that you’re investigating. Is that right?


DAN MCCRUM: Oh, yeah. I haven’t traded in individual stock like my entire career.


CHARLES MIZRAHI: Right. But you’re in cahoots with the short sellers? OK.


DAN MCCRUM: Yeah, I’m in cahoots with the short sellers. And to begin with, we’re kind of laughing at it, going: “Well, this is the same playbook.” Because this is what the company had done time and again. Every time it was attacked by critics, it said: “Short sellers, nothing to it.” And it was all dismissed. What was kind of weird was then the German government joined in. So, the day afterwards, the equivalent of the SEC — BaFin, the German regulator — says: “Yes, we’re going to investigate these claims of market manipulation.” All right. That’s a bit weird. What about the accounting fraud?


CHARLES MIZRAHI: I don’t think it was Carson Black … Maybe it was him or maybe it was someone else, where he did the same thing with Chinese stocks and — was it Carson Block?


DAN MCCRUM: Yeah. He did the same thing with Chinese stocks.


CHARLES MIZRAHI: What’s the name of his company?


DAN MCCRUM: He is Muddy Waters.


CHARLES MIZRAHI: Right. Muddy Waters said that these Chinese — I think it was Sino-Forest…


DAN MCCRUM: Sino-Forest was the first one.


CHARLES MIZRAHI: He said it was just a fraud — and it was a fraud. And Hong Kong at the time barred him or did some really nasty things to him saying. And he was proven to be right, but the regulators were even sucked into the fact … championed the company against all these accusations until they turned out to be wrong. The regulators were totally wrong — which just boggles my mind that, if the guards are watching the inmates and they’re siding with the inmates against people who are just researching this stuff — just as an investor — don’t you feel a little uncomfortable when you’re wondering whose interests do they have at heart here?


DAN MCCRUM: It’s really hard to understand. I think in this case, it was a bit of circling the wagons. This big German company — which was their exciting new technology giant — has suddenly been attacked by foreign speculators. And Wirecard gave them a very good example of this. So, it put together this witness statement from a guy in London who turns out, he had a bit of a shady past. He’d been convicted for hiding, I think £126,000 worth of money from a drug gang underneath his daughter’s bed — which the police found when they raided his house. And he was married to a celebrity TV person. And so, they found this guy who gave a witness statement saying he had heard that the story was coming that morning when we first published. And Wirecard took that and gave that to prosecutors in Germany.


DAN MCCRUM: Now, the prosecutors don’t seem to have looked into this guy’s history. They just described him as a trader, not a convicted drug money guy. And he didn’t even sign it. But they gave this unsigned witness statement to the German prosecutors and they announced a big criminal investigation into me and one of my colleagues at the Financial Times. And then they do something which they had only done before during the financial crisis. They instituted a short selling ban to protect Wirecard from speculators.


CHARLES MIZRAHI: Amazing. Absolutely amazing. And just because we’re running out of time, Dan…


DAN MCCRUM: Oh, sorry, I’m far too long winded about all this.


CHARLES MIZRAHI: No, this is really amazing. This is stuff that you just don’t believe. It’s stranger than fiction, but it actually happens. So, then you write another article on October 15.


DAN MCCRUM: “Wirecard Suspect Accounting Practices Revealed.”


CHARLES MIZRAHI: Right. Revealed. And we’re now at the beginning of the end. It’s over for them. The stock price starts to plunge. The curtain’s pulled back and it kind of progresses rather quickly. I think a few months later, I think in 2020 … Could you just take us forward what happens there? They start going in and scraping and finding out all this money’s missing.


DAN MCCRUM: Mmhm. So, in October 2019, we basically plunge in the knife. We wrote the story saying: “This is how Wirecard is committing the fraud. These are the fake customers which don’t actually exist.” And what we did is we published all the documents. So, the whole world could see for themselves what was really going on. And it basically laid bare that this whole thing was a big fraud. But Wirecard did was, it announced it would investigate itself. So, the police didn’t do anything. It said: “We’ll bring in another accounting firm — KPMG — to do a special audit, to check the work of the first accounting firm, Ernst and Young.” And so, this goes on. And this is going to take six months. So, they buy themselves six months of time. And they go away and we’re waiting and waiting. And they come back and the amazing thing is, KPMG comes back and says: “Yeah, we couldn’t actually find any proof of these customers.” And the company still doesn’t really collapse at that point.


CHARLES MIZRAHI: What’s the final nail in the coffin? When the company just unravels and the CEO is wanted and taken into custody. And I think the CFO is still somewhere out there and cannot be found, right?


DAN MCCRUM: Yeah. So, it comes down to, okay, are the auditors going to sign off on the accounts? And Wirecard’s claim that its €1.9 billion in banks in the Philippines. And so, EY says: “Well, can you just transfer some money from there to here just to prove it? You’re a payments company, right, this should be straightforward.” And they promise they’re going to do it. And it takes a while. And nothing actually happens. And so, in the end, instead of announcing the results, they announce: “EY cannot confirm that this €1.9 billion of cash really exists.” And it’s like the rug is suddenly pulled back and the entire thing collapses.  And within a week, it’s filed for insolvency and the chief executive has been arrested.


CHARLES MIZRAHI: So, where are we now in this process? That was 2020, right? So, now where are we two years later?


DAN MCCRUM: So, this guy — Marcuz Brown, the chief executive — he’s going on trial later this year for gang fraud, for basically masterminding it. But the guy who’s missing is Jan Marsalak — his sort of younger sidekick. They’re both Austrian. Marsalak is about ten years younger. And so, Brown is this very dry, aloof, austere character. Doesn’t really talk to anyone, doesn’t socialize with anyone, who has run the company for two decades. Marsalak is the total opposite, like charismatic, charming, life and soul of the party. You know, the wunderkind.


DAN MCCRUM: So, Marcus Brown sits in Munich, not doing very much in head office. And Jan Marsalak is the one who runs around the world keeping the plane spinning. And so, Wirecard collapses on, I think, Thursday or Friday. And the police don’t show up. At this point, it’s still very much a stock market matter. The share prices collapsed. Everyone’s freaking out. And Marsalak is basically allowed the next day to catch a private flight to Belarus. And then he disappears. He’s still there, so far as we know. And what we’ve learned since is that it turns out he had some very interesting friends in Austrian intelligence and also Russian intelligence.


CHARLES MIZRAHI: Absolutely amazing. So, the trial is headed for the end of this year for Marcus?


DAN MCCRUM: So, for Marcus and a couple of his key accomplices — alleged accomplices, I should say.


CHARLES MIZRAHI: Folks, the book is Money Men by Dan McCrum. And Dan just really touched the surface as to this journey, which took him five or six years. We didn’t talk about the threats to his life, his paranoia — which wasn’t really paranoia — of thinking that people were after him. A whole bunch of shady characters, pornographers, gambling. You got the ash heap of finance in this mess. And it took one guy, not a whole team, which is also amazing — the power of the pen, or the power of the computer, really.


CHARLES MIZRAHI: If you find fraud, if you do your homework, you could really learn a lot from public filings. But 98% of people don’t even bother reading them. That’s what I’ve always found. It’s just absolutely amazing. If you invest, you have a tremendous edge by just reading financial filings, because I guarantee you 98% of them don’t. And as Jimmie Rodgers, famous hedge fund manager, said: “If you want to be ahead of 98% of the people, read the annual report. You want to be ahead of 99% of everyone else, read the footnotes.” Nobody reads them.


CHARLES MIZRAHI: And I think, Dan, you’re great proof of that and how you’ve helped the investment community and driven out a very, very bad player. And who gets hurt? Shareholders. Shareholders are left holding the bag — mom and pops who bought stock and institutions who should have known better, who manage pension funds and a whole bunch of other money of investors. That’s the crime. I think their due diligence, they’re lacking. And this is a story that continually just it doesn’t repeat itself the same way, but it just rhymes.


DAN MCCRUM: Exactly.


CHARLES MIZRAHI: What’s next for you, Dan?


DAN MCCRUM: Well, there’s a documentary coming out in the autumn, I think, on a streaming service you may have heard of. And the book is coming out. Well, this is coming out when the book is out. Right. So, the book I’m going to be frantically trying to tell everyone about. And then, I’ve got a couple of stories up my sleeve I’m working on.


CHARLES MIZRAHI: Have you become a magnet for people — now that you have this kind of visibility — for a lot of other whistleblowers? You’re getting a lot of good tips on companies that are just not doing the right thing?


DAN MCCRUM: Yeah, I mean, whistleblowers now know where to come. And this is testament really to the whistleblowers — this whole story. None of it could have happened. And they aren’t treated well enough. But I am very grateful for all of the whistleblowers that are getting in touch.


CHARLES MIZRAHI: If you’re listening, and the company you work for is doing something really, really bad, Dan McCrum’s the man who could put it on the front page. And if you have a really good story, I’m sure he’d be interested.


DAN MCCRUM: Please do get in touch.


CHARLES MIZRAHI: Yeah, definitely. Dan, I want to thank you so much for coming on the show. The book, folks, is Money Man. I hope this book sells a lot of copies. Because I think for the investment community … And it makes great reading. But for the investment community, you should always be asking the hard questions. And when something looks too good to be true, it usually 99% of the time it really is. And, you know, you’ve proven that — another story.


CHARLES MIZRAHI: And by the way, just on a side not before we close, I love doing these kinds of stories. I love doing these kinds of podcasts because it’s really David versus Goliath. And it’s one guy seeing something out there that doesn’t smell right and pursues it and the small guy can win. You know, it’s all out there. It takes a lot of time, a lot of effort, a lot of perseverance. And you have to go over a lot of obstacles. But in the end of the day, the financial system does work — although it takes a lot of time sometimes to take down these companies. But hopefully, the truth will prevail. Dan, I want to thank you for coming on the show and lots of continued success to you.


DAN MCCRUM: Great. Thank you very much, Charles. Really appreciate it.

CHARLES MIZRAHI: Thanks for listening to this episode of The Charles Mizrahi Show. If you’re a new listener, welcome! If you’ve been listening for a while, we’re glad to have you back. Either way, we’d love to know what you think of the show. Please leave a review if you listen on Apple Podcasts. Reviews make it easier for others to find the show. You can also see the video of the interview on The Charles Mizrahi Show channel on YouTube.

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