The scandal surrounding the payment processor Wirecard is one of the most costly cases that the Munich I public prosecutor is dealing with. The prosecution has received dozens of criminal charges since the group went bankrupt in June. The prosecutors are investigating ex-Wirecard boss Markus Braun and a number of other former top managers – among other things, on suspicion of commercial gang fraud and market manipulation. In addition, there are six preliminary investigations against ex-board members that involve money laundering. A mammoth process.
Online gambling and suspected money laundering
As early as 2010, the Munich I public prosecutor’s office investigated suspected money laundering after several reports. The proceedings were directed against “unknown persons in charge of the Wirecard Group”, a spokeswoman said in the summer when asked by Personal-Financial.com Magazine. According to her, the allegation was “financial transactions in connection with online gambling in the USA”. According to insiders, Wirecard had established a system in the 2000s with which illegal transactions could be camouflaged for online casinos. However, the proceedings in Munich were discontinued in February 2012 because, according to the authority’s spokeswoman, “evidence of the crime could not be provided”.
During this time there was also another preliminary investigation by the Munich I public prosecutor, which was based on a suspected money laundering report from March 2011. In this case it was about the Wirecard Bank belonging to the group, which, according to another bank, is said to have collected direct debits from customers on behalf of two fraudulent companies. In connection with the allegations, a special audit report was also commissioned by the Bafin and evaluated by the investigators, as is evident from a response from the Bavarian state government to the FDP parliamentary group that Finance Forward and Personal-Financial.com has received. However, the proceedings were later discontinued because a sufficient suspicion “especially with regard to the subjective factual side, intent or recklessness” could not be proven, as the answer says.
In 2016, a suspected money laundering report from another credit institution also led to investigations – in this case with the Munich II public prosecutor’s office Profit distributions to customers or payments to providers. This case was later handed over to the Saarbrücken public prosecutor’s office. Upon request, their spokesman announced that the procedure taken over from Munich had been assigned to a “larger investigation complex” that deals with trading so-called binary options – i.e. particularly speculative financial derivatives. It is about the suspicion of commercial gang fraud against the operators of various online trading platforms for the alleged trading of binary options. As the spokesman announced, the investigation is still ongoing. Current or former managers of Wirecard Bank are not listed as suspects.
It doesn’t look good for long-term shareholders
In 2019, the Munich public prosecutors received two reports from the Financial Intelligence Unit (FIU) in connection with Wirecard – the point at the General Customs Directorate where reports of suspected money laundering from banks across the country are received and checked. On February 13, 2019, the FIU submitted the suspicious activity report it had received from a private bank at the beginning of February after an initial examination to the Bavarian State Office of Criminal Investigation – two weeks after the “Financial Times” had reported in great detail about accounting irregularities at Wirecard.
According to a confidential list for the Bundestag, which Finance Forward and Personal-Financial.com has, the FIU saw indications of market manipulation in connection with a million payment, in which Wirecard CEO Braun and Asia board member Jan Marsalek were involved – “especially with regard to the already in reports in the press ”, as FIU boss Christof Schulte said at the end of August according to the minutes in a closed session of the Bundestag finance committee. The LKA Bayern then forwarded the suspicion to the Munich I public prosecutor on February 15, but the latter stopped its investigations in mid-April because they saw no sufficient evidence of a criminal offense. On the other hand, the Munich prosecutors drove investigative proceedings against journalists of the “FT” and several short sellers on suspicion of market manipulation. The prosecution ended the proceedings against the two journalists only after Wirecard went bankrupt this summer. In the case of the shortsellers, their investigation is still ongoing today.
In a second case, too, the FIU passed a suspicious transaction report on incidents in which there is a reference to today’s allegations against Wirecard. As can be seen from the list for the Bundestag, this report at the beginning of June 2019 was about the third-party business (TPA) of the payment group for which Marsalek was responsible. It is now known that a large part of the sales with third party partners in Asia, which was shown in Wirecard’s consolidated balance sheet, did not exist. In this case, too, the FIU promptly forwarded the report to the Bavarian LKA. But even in this case the investigation came to nothing. Only after the forgeries were exposed and the group went bankrupt, the public prosecutor’s office in Munich decided to reopen both cases from 2019 in active criminal prosecution.
The investigations that are ongoing today in connection with the Wirecard scandal, however, do not relate to all previous misconduct of the group – but only to the period from 2015. For the aggrieved shareholders who have held shares for a long time, that’s a problem: you can probably not expect to get some of their money back by lawsuit. In August, the Munich I public prosecutor’s office used arrest orders to freeze assets in the three-digit million range from four former Wirecard top managers and their private companies in order to secure them for the victims. In contrast, an investor who had already bought shares in 2009 recently failed at the Munich I Regional Court with an application for attachment to ex-CEO Braun. In its decision, which is available to Finance Forward and Personal-Financial.com, the court pointed out that the prosecutor’s investigations only concern the period from 2015 onwards. Things are not looking good for long-standing Wirecard shareholders.
This article was also published on the finance portal Finance Forward. You can register for the daily newsletter here.