On the Wirecard Scandal [Part 1]
[Part 1] summarizes the biggest financial scandal today. [Part 2] will be about why this event is bad for crypto's optics in the Philippines.
The biggest financial news in the world right now involves the Philippines, albeit in a bad way. If you remember the Bangladesh Bank Heist, where money stolen from a bank in Bangladesh ended up in the country through a bank in RCBC. This one has all the makings of a possible Netflix movie. It’s not yet finished. The end credits could not roll because all the actors are not yet revealed.
And I think it will be bad for cryptocurrency’s “optics” in the country.
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Wirecard is a German payment processor and financial services company, dubbed “Europe’s largest fintech.” By 2018, shares of Wirecard peak at €191 which effectively valued the company at $26 billion.
Financial Times Investigation
From 2018 - 2019, the Financial Times published a series of investigative reports, among them a revelation that a company that’s doing business with Wirecard is using the address of a retired seaman’s home in Cabanatuan City, Philippines to conduct financial business. Other addresses of Wirecard’s partners are listed in the country. The link, according to the Financial Times, is that the names of these companies with dubious addresses “are sitting in the books of Wirecard’s accounts” department in Singapore. Wirecard sued the publication.
Numerous fraud allegations followed and Wirecard finally appointed auditing firm KPMG for third party audit of the company, to clear its name. Ernst & Young (EY) also audited the company but in March 2020, both auditing firms postponed the release of their reports.
EY received documents claiming the Wirecard’s money worth €1.9 billion were in two Philippine banks.
BPI and BDO
On June 16, EY was informed by the two Philippine banks - BPI and BDO that they do not have in their records the €1.9 billion. Two days later, Wirecard officially disclosed that this money is missing. (Days later, the company claimed the money may not have even existed in the first place.) CEO Braun soon resigned and was arrested a few days later.
COO in the Philippines?
Jan Marsalek, the COO, is suspended. A separate report suggested he may be in the Philippines.
Officials from the Bangko Sentral ng Pilipinas (BSP) advised both BDO and BPI to initiate legal investigation and action, particularly since according to the two banks, at least two of their junior officers were involved in forging fake documents to make it appear that the money is in the Philippines. A BSP official told Mr. Dax Lucas of Inquirer that they believe the money never entered the Philippines and that “the perpetrators used” the names of BDO and BPI “to cover their tracks.”
Currently, the Bureau of Immigration is looking into Mr. Marsalek’s travel history and if he’s really still here in the Philippines. A Filipino attorney also got his name involved for allegedly becoming a ‘Wirecard Trustee’ claimed he was framed up.
The story is not finished. The latest is that Wirecard claimed the money did not really exist.
The scandal could become the biggest financial fraud of the decade, granted the decade just started. Many remembered the Bangladeshi Bank Heist in 2016, wherein portions of the money worth $81 million reached the Philippines through RCBC Bank, to which journalist Likha Cuevas openly wondered on Twitter why it’s always the Philippines where financial criminals would transfer their money.
In [Part 2] of this topic, I will try to answer why such a financial scandal is bad, for optics, particularly for fintech and cryptocurrency not just in the Philippines but everywhere. The gist of the next part, if I can sum it up now, is that assuming everything is true, if financial criminals could do this even under the supposed watchful eye of central banks, monetary authorities, and global financial regulators, why would these regulators not impose the strictest possible measure for cryptocurrencies, whose transactions are mostly out of their purview?
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