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Skandal! starts tonight on Netflix: the story of Wirecard

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Skandal! starts tonight on Netflix

What’s all that about?

It’s all about Wirecard and the investigative journalism of one Dan McCrum, a friend who reported on the affair with The Financial Times. Over time, Dan’s work resulted in proving that Wirecard was  a scam. Having said that, he was attacked by the company and its representatives, with threats of jail and more. I covered the story before, and reached out to Dan to discuss it in more depth the other day. Here’s our chat and, if you want the whole story, buy his book.

Chris Skinner: I’ve followed you and the Wirecard scandal for quite some time, in fact when you first broke the story, which is about seven years ago now.  How did you come across it?

Dan McCrum: I’ve spent a lot of time writing about companies that looked a bit strange with dodgy numbers and dodgy characters. I then got to know a bunch of short sellers who were interested in similar kind of things. One of them said to me one day, Dan would you be interested in some German gangsters, and it turned out that he was talking about this little company that was called Wirecard.

Chris Skinner: The funny thing is Wirecard, from my side – until you opened up the keg – were a real innovator and, working behind the scenes, they supported many of the best Fintech companies in the world. They had this huge credibility for that reason.

Dan McCrum: Well they did. The thing is, you see, what a lot of these tech companies do. Every time there is a whiff of an association with a legitimate company, they put out a press release. They were very quick to trumpet their technology through these relationships, but it was all hollow.  I mean Aldi is a good example. They made a great deal out of the fact that they were working with one of Germany’s best and most famous grocery chains. But they were losing money on the contract and were just doing it to lend them their legitimacy. Revolut and Monzo were one of their largest businesses, so they were enabling a lot of Fintechs, but basically that is because it turns out a lot of Fintechs are essentially prepaid cards with some fancy wrapping and software on top of it.

Chris Skinner: Yes, I think what is interesting in context that Wirecard is actually a bundle of companies, it is not one company. BaFin, for example, the German regulator, said they were regulating the German entity, which is not the same entity that were dealing with Monzo or other entities in global markets.

Dan McCrum: Yes, so they were quite good at siloing people. They owned the bank, and that was regulated by the Germans, and then they would buy businesses all over the world and leave them alone.  They didn’t bother to integrate them and wouldn’t do much with them. I spoke to many people after Wirecard collapsed, and what a lot of them said is that they would wonder where the money was being made.  There were various people in different bits of the business going, well our business isn’t that profitable but they must be making the money somewhere else, and also some people thought their bit of the business was profitable because, in isolation, it was making some money. However, in broad terms, the company was not making any money at all. But then, if you can constantly steal money, then you can build up what looks like quite a large and impressive organisation.  Wirecard was employing about 6,000 people when it collapsed, but there was nothing real to it. We talked about the technology. If we mentioned the technology they’d be, well we didn’t really have any technology.  One of the things we discovered after it collapsed was Wirecard Bank was running on systems that were so old and outdated, that they reached the point that they were no longer viable to be used as a regulated business. Marcus Brown, the Chief Executive would stand up and make all these claims about artificial intelligence and it just simply wasn’t true.

Chris Skinner: When did you realise you were onto a story?

Dan McCrum: I mean, straight away. I thought this is fascinating because I had written about a few frauds and you quickly get a feel for a company. For example, Wirecard’s tactics were to accuse me of being corrupt, so I was clearly in league with hedge funds trying to manipulate its share price.  The Chief Executive, when I spoke to him, did a bunch of things which liars do. Typically, he would answer a question with a question.   I asked him if he was a crook and he said “Why would I do that?”, then he’d point to all the people that Wirecard work with. He would reference their auditors Ernst and Young or the investment bank analysts but, on a simple level, I would ask Wirecard questions about its businesses and he wouldn’t have answers to them.  The company hid in complexity. It tried to baffle everyone by making what’s a moderately complicated business more complex. The business was basically getting money from your credit card through its bank to the shop where you’re trying to buy something.  That process isn’t that difficult to understand, yet Wirecard somehow draped itself in making that very complicated and that intimidated people into thinking the problem far bigger because they didn’t understand the business, rather than the fact that Wirecard was lying about it.

Chris Skinner: What was interesting was, as you traced them, the Singapore and Dubai connections revealed themselves and that to me was particularly interesting. It was like a nested company structure which was difficult to unravel, but you unravelled it.

Dan McCrum: It was a little bit like peeling an onion. There were two theories about what sort of crimes it was up to: (1) was it doing accounting fraud and inventing it’s profits; or (2) was it actually very profitable, because it was laundering money for all sorts of nasty people?  And, as we were trying to work out what was going on with Wirecard, we weren’t sure what it was that we were going to find.  Right up until the point that we started to realise that Wirecard had these special partners – and they called them third party acquirers – who were essentially friends.  The story inside the company was that if there was any kind of nasty business that Wirecard didn’t want to be associated with, then it would send that payment processing to these friends. It hasn’t told the outside world about them but, thanks to our reporting we worked out who they were. Then we go and knock on the door.   So, we sent my colleague to the Philippines and she goes there, not knowing what she was going to find, and she finds a couple of men who are giving a poodle a haircut. They are completely baffled. There is no sign of any payment process going on anywhere at all.  That is the moment where we start to realise there’s a problem here.

Chris Skinner: I must admit, you were quite brave at that point because you carried on targeting the company in your investigation, but you were targeted back by the German regulators and authorities and effectively could have been jailed for the reporting you were doing.  And it wasn’t just you, but your colleagues as well. You must have been quite scared?

Dan McCrum: Yes this is one the big themes that we try to bring out. It’s the power of that fake news critique.  It has been totally weaponised by a lot of different people, and so what the story becomes is: “who is telling the truth?”  Is it the company or is it The Financial Times? And we reach a point where we are under criminal investigation by the German Authorities, who seem to think we are leaking our stories to market speculators before we publish them.  So, that starts to get quite scary and start to realise that one of the main bad guys, this extra ordinary whizz kid called Jan Marsalek, who’s  kind of part spy and part charmer, is running a payments company as his day job but, on the other hand, seems to be hanging out with Russian spies and making friends with Libyan Militias and other very nasty friends indeed.  That gets quite scary.

Chris Skinner: So how did you get through those days.  You must have had dark days? What kept you going?

Dan McCrum: I had no choice because I had to clear my name and the only way to do it, to save my reputation, was to kill the company.  It became an existential thing for them, and a question of the reputation of the newspaper.  They had said we were corrupt and the only way through that was to keep reporting, and to try and prove that this company is full of criminals.

Chris Skinner: What was the breakout moment when you thought yes, I’ve done this?

Dan McCrum: I am actually sitting in the exact spot I had that eureka moment, where a whistle blower had given us this huge stack of files. I had spent months going through them, squirreled away in a bunker, and then we had written a whole bunch of stories. That prompted other people to get in touch and it was like each layer of the onion coming away.  Then we reached this moment where I suddenly realised that one of Wirecard’s customers has to be fake.  I’ve got a spreadsheet full of numbers and names and things and then, hang on a second, that company I checked out, it can’t possibly have been doing the business with Wirecard that it claimed! I then started going through the other names and look them up and go, hang on that one was insolvent years earlier, that one went bust as well.  In that moment, it all came together and everything made sense and it was like, oh my god it’s so simple, they are just making it up, it’s all fake.  I think I just started laughing and my colleague, who sits opposite says, Dan what is going on and I am like, I think I have cracked it, it’s just all fake.  It took a lot of work from that point to prove it all but that was when I realised that, suddenly, I had solved the puzzle. But then it took more than a year from that point for Wirecard to actually collapse.

Chris Skinner: I was going to say, this is like five years of your life or more.  The tenacity to keep going must have been something inside you?

Dan McCrum: I really couldn’t let it go.  Like I said, once we started getting close to the truth, they made it impossible for us to stop.  There was a bit in the middle where I did give up for a bit, because I felt I had written as much as I could and it was going to take something special. I was then very lucky because I had written those stories, the mother of a whistle blower saw them and she got in touch. Thanks to her and her son, we were able to blow the case wide open.  But it always nagged at me that I would write other stories, but it was Wirecard that was the one that got away for a long time. Then, when I got the job on investigations, it was always going to be the first name on the list, irrespective of what we had.

Chris Skinner: You’ve had this incredible experience and the book Money Men has done incredibly well.  What have you personally learned from this experience?

Dan McCrum: So I’ve learnt by a lots of mistakes along the way. Some of the things I’ve learnt are that, if you don’t get the answer, you have to just keep asking questions until you do.  One of the most frustrating lessons was how hard it was to change people’s minds, when there is money at stake.  You know we would publish stories that I thought were saying, “there’s fraud going on”, and one of the big mistakes that people made was investors, regulators, they looked at that and looked at the numbers.  In the beginning, we’d talk about maybe $30 million that we could show were fraudulent contracts, and they looked at the numbers and thought that’s not very much in the context of this company worth $30 billion dollars.  But what they should have been looking at were the practices.  Why on earth would people running the finance team of this big and respectable company, forging documents?

Chris Skinner: One of my experiences over the years is that a lot of the fraud happens in financial institutions is never reported because they don’t want that in the public domain.  They want to appear to be trusted and therefore, if they find an employee that is doing bad practices, they just get rid of them, and they don’t reveal that into the public domain.

Dan McCrum: Yeah, I think there are a lot of examples of that. Another lesson, a simpler one is never trust a man in a black turtle neck because Marcus Brown, the Chief Executive, started dressing like some sort of alpine ski instructor, and making all these empty promises about a cashless society and throwing out some observe projections for the future.  That is not an unusual pose for the heads of large technology companies to make.

Chris Skinner: I am going to write this up so it goes out on the day that Skandal! goes out on Netflix.  What is Skandal! Is it a fiction, a fact?   Is it a replication of your book or is it a drama?

Dan McCrum: Skandal! is a documentary based on the book, with the cooperation of me and my colleagues at The Financial Times.  Because, it is such an incredible story, so much that is completely unbelievable, we just had to bring it to the big screen.  And what Skandal! does is that it really vividly brings to life some of the craziness of the story, and the drama. It is really a sense of a company right at the heart of the financial system, and it’s up to no good. The more we dig, the more we discover.  One of the main bad guys seems to have links to Russian intelligence, and has run off and is hiding in Moscow.  Skandal! is all about how we get to that point. It is quite an adventure.

Chris Skinner: And final question for you is, obviously, the is all now done and dusted, you’ve done the book and you’ve got the documentary, what is next?

Dan McCrum: Well, I am still a reporter at heart and I am looking for the next big story.

This is Dan btw ...

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Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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