From a industry perspective, grey areas will need regulatory authority to step in and issue guidance. Where there is absence of guidance, there is no need for a firm to shy away from grey areas.

In New Yorker’s March 2023 edition, Ben Taub tried to build his story of Wirecard by calling out several legally permitted moves as sketchy: the reverse takeover, buying over a small German bank, the rule skirting that allowed Wirecard to expand it’s business or even regulatory arbitrage. In this instance, there is where is the seed of doubt?  His suggestion that these moves allow the firm to hide from regulatory glare weak because even legal moves like these require approval by regulatory or corp governance bodies. The cooking of books story is mainly the question of where is the cash if there is so much profit. If there is no cash, the profit must be faked is the reasoning.

The crime suggested later in the article is money laundering. Yet for this, there is nothing more than a suggestion of Russian involvement. Money laundering means real money flows as well as a real crime behind the flows. Other than hiding their revenue behind miscoding (to avoid a business contractual obligation), creating product lines that could lead to money laundering uses, there is no  investigation of the money flows. But this is the difficulty of money laundering investigation. It is impossible to catch someone who is extremely good at it. I speculate that there is real money involved but perhaps for every dollar of real money, there is a good size of dirty money that needed to be used up and this is the incentive to make the money disappear from the books.

Nobody likes short sellers and there are unscrupulous firms who publish research reports claiming to have evidence of financial mismanagement. This is a real threat for large blue chip firms who may be attacked by short sellers. Most exchanges have curtailed shorting activities.

To go after them thug style is the most telling that they are thugs. It seems to me that there is a money laundering concern that is known perhaps to everybody.   Perhaps investigators lack evidence to catch Wirecard. However, they  enough evidence to get the management for something – that something is fraud.

 Aside: This fawning of the US on New Yorker made me chuckle: “In finance, globally, you have a situation where the only effective police are the Americans.” Cash flows across geographies in seconds and amounts may split and co-mingle with legitmate money to avoid notice. To stop flows, to catch money laundering in action requires international cooporation which is difficult to priortise especially if domestic concerns are headlines. There is no superhero who can single handedly stop money laundering or the criminal activity that generates the money. Why this brown-nosing, I wonder.