Struggle for Wirecard: Does the law firm from Singapore solve the case?
Wirecard employees may have manipulated balance sheets, the Financial Times wrote about this suspicion. One is a victim of market manipulation, says CEO Markus Braun. It could soon become clear who is right.
The darned disc. As if Jan Marsalek did not have enough trouble, Wirecard AG's Chief Operating Officer (COO) is now suffering from severe back pain as well. For a while, the man could not even fly for daily business with the Dax Group from Aschheim near Munich.
It was collecting miles for years Marsaleks hobby. Together with CEO and major shareholder Markus Braun, he pumped the payment processor from the 8000-soul nest Aschheim near Munich through acquisitions around the globe to a billion-dollar company.
Wirecard positions itself between retailer and end customer and ensures that the online payment process works. This earns the company fees; the margins are small, it depends on the mass. Today, Wirecard handles worldwide online shopping for more than 100 billion euros.
An incredible success story from the German province, written by Marsalek and Braun. Two Austrians who have been leading Wirecard in klandestine for almost 20 years. Wirecard displaced Commerzbank from the Dax at the end of September.
But since the rise in the stock market Olympus Wirecard is stuck in a bush of allegations and rumors; it's about alleged balance sheet manipulation and fictitious sales at Wirecard's Asian subsidiaries. The case is a business crime. As antagonists face each other: The "Financial Times" (FT) in London, an icon of capital market journalism, few media enjoy such credibility. In several articles, the FT since January 30 has made serious allegations against Wirecard. On the other side are the promoted from Aschheim, led by Markus Braun, who sharply denies the allegations and counters with the claim to be victims of price manipulation. Financial supervisors and prosecutors share this suspicion and investigate.
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The next chapter of the thriller is likely to be written by law firm Rajah & Tann (R & T). The Singapore firm plans to release its final report on Wirecard operations in Asia shortly.
In a preliminary first dossier, R & T had identified significant grievances in May 2018. The FT slaughtered the paper and other controversial material, accusing Wirecard of falsifying contracts and invoices and inflating sales. The stock collapsed.
Also the SPIEGEL has the preliminary report as well as a part of the extensive material to which the office had access. If one delves into the documents, it can be found indications that Wirecard employees should have made questionable bookings. At the same time there are indications that raise doubts about the value of the investigation report. The gap between the views of the two antagonists may well be closed by the investigative authorities.
Punches and counterstrikes in the daily cycle
FT and Wirecard exchanged blows in the past weeks almost every day. Wrote the FT, from evidence of fake and backdated contracts, Wirecard replied that it was "clear that the journalist was provided with false information", and indicated that the goal had been to manipulate the Wirecard course, a charge that again denied the FT hard.
It is normal for media to report well-founded suspicions, even if this causes strong price movements, it has nothing to do with market manipulation. In the dispute over Wirecard, however, it could ultimately also be a question of whether the Financial Times could be instrumentalized for the purpose of market manipulation.
The 31-page preliminary report by R & T of 4 May 2018 raises drastic allegations. But it was created within a few days, is based mainly on statements of a single whistleblower and substantiates concrete allegations for individual events hardly valid.
However, the Financial Times also cites e-mails in its articles and refers to numerous documents which, in their view, contain clear indications of irregularities at Wirecard in Asia and an early recognition of such events by the Group management in Munich.
Strange things about the final report
The expected for the next few days final report of the firm should bring more light in the affair. But why did Wirecard already declare in February that the final report would relieve the company? Why did R & T announce itself on 3 February, so far no one has been able to detect any criminal behavior by employees or directors of the Group, although the preliminary conclusion of R & T sounded quite different?
The R & T team of two partners and three lawyers, who had written the first preliminary dossier, has since been dissolved. One lawyer has left R & T, two more are not in the list of employees of the firm. The law firm does not want to comment on the personal details and circumstances under which the first dossier was written.
Serious allegations, strong denials, all accompanied by violent price fluctuations and the suspicion of market manipulation - the events are reminiscent of the year 2016.
At the time, reports from the Zatarra Research Internet platform were circulating about Wirecard's business practices. They were based on publicly available information that had been cleverly edited and put Wirecard in the dark. Mostly it was about online gambling, for which Wirecard should have made payments and which should have been partly illegal. None of this was confirmed, the course shot up again.
Increase in short sales
Now, three years later, the information comes from the group itself, certified by the dossier of a renowned law firm and published on the FT, which apparently already some time before the first publication the dossier and extensive documents and mails knew. Where the explosive material came from is unknown, media do not comment on their informants.
From autumn 2018, the volume of so-called short sales of Wirecard shares rose moderately but steadily. Investors - mostly hedge funds - borrow shares to sell them "empty", so they can keep their heads down, buy back later at a cheaper price, return the paper to the lender and pay the difference as a profit. In the Wirecard environment, the rise in these short sales concludes that investors already knew in the fall that explosive material was in circulation for Wirecard. However, short selling increased significantly only after the publication of the first FT report.
Who, when, what knew and used this knowledge, that now determines the public prosecutor's office in Munich, which pursues the suspicion of market manipulation and has made requests for mutual legal assistance in order to get to the bottom of the matter abroad.
After the Zatarra attack of 2016, the public prosecutor's office Munich against 39 people for market manipulation. 38 proceedings were discontinued, one for cash. Only against the Zatarra co-founder Fraser Perring, the prosecutor's office has applied for a warrant, it will soon decide the district court of Munich.
Wirecard defends itself against the recent attacks with harsh methods. In Singapore, where the authorities investigate the allegations published in the FT, the company defends itself in court: the investigators had exceeded their mandate in a search. The authorities, in turn, feel hampered by the group in their work. Wirecard declares to cooperate fully with the authorities.
Three scenarios of how the thriller could end
How will the thriller end around Wirecard? Three scenarios are on the rise.
- First, the FT is wrong, and the allegations that Wirecard employees have polished budgets, falsified contracts, and cheated on them are vanishing. For the FT that would be associated with a huge image damage. Such a development is likely to fuel the suspicion that the market has been manipulated with deliberately launched false allegations against Wirecard.
- Secondly, the R & T final report or investigations by the Singapore authorities may indicate that the allegations made in the Financial Times are true, if only partially.
This should shatter the stock price, Wirecard's leadership for Braun and Marsalek would be hard to hold. It would be hard for the company to iron out such a loss of confidence.
Even such a scenario does not exclude insider trading or market manipulation. Because even if the allegations against Wirecard are correct, investors could have used information illegally to benefit from it.
It is hard to imagine that the Financial Times or the Wirecard leadership, with their aggressive communication to the affair, deliberately took the risk of the big bang, which would mean either of these two scenarios for one of the two antagonists.
- Why a third final of the thriller is conceivable. Have Wirecard employees in Asia forged contracts and faked deals to enrich themselves at the expense of the company?
Wirecard would not look good in this final, but the company would have to be able to hold up deficient checks. The GAU but would stay out well. The architects of the miraculous ascent, especially Braun and his confidant Marsalek, took their breath away.
Brown and Marsalek barely feel pressure from the inside: the six-member supervisory board is considered weak. Only Chief Financial Officer Alexander von Knoop, it is said internally, go carefully at a distance, especially to Marsalek.
Peace, that much is certain, will not come so soon in Aschheim.