$2 Billion Missing: German Online Payment Provider Wirecard Goes Bust, Faces Fraud Allegations

July 2, 2020 3 min read
by Thomas Wolf

German online payment provider Wirecard declared bankruptcy last week after a series of Financial Times investigations found that the company had massively overstated its income streams over a period of several years.

Wirecard has been a popular payment solutions provider for many online gambling companies, both on and off the books. Shares were trading at $112 just last week and have now fallen precipitously to under $2 per share. Some investors have no doubt already lost millions on the company.

Wirecard goes bust

German police arrested Wirecard founder Markus Braun, who is now out on bail. Singaporean and Philippine police are investigating former Chief Operating Officer Jan Marsalek, who was fired from the company as this latest round of allegations broke last week.

One FT investigation revealed that up to half of Wirecard’s $2 billion in annual revenue might come from “third-party acquirers.” In plain terms, these are companies that work closely with Wirecard to take on payments for clients deemed too risky for the main Wirecard business.

These clients included many pornography makers but also grey-area and unlicensed gambling sites. While Wirecard has had legitimate gambling businesses use its services, the extent of the company’s income coming from these shadier sources was extreme.

Trail of Deception

Many of Wirecard’s “third-party acquirers” were apparently based in the Philippines. The country is home to a vast number of grey-area gambling operators that target Chinese customers despite gambling being illegal in both states. Collectively, these operators are called Philippines Offshore Gambling Operators (POGOS).

It’s unclear whether any POGOs were linked to Wirecard’s Philippine-based partners.

A company called ConePay International did millions of dollars’ worth of business with Wirecard between 2015 and 2017. However, Conepay’s registered address is a small farmhouse on the edge of the city of Cabanatuan in the northern Philippines.

When FT reporters visited the address, they found it was owned by a local fisherman who had been living there with his family for over 40 years. He had never heard of ConePay or Wirecard until a letter arrived on his doorstep invoicing ConePay for millions of dollars.

Another company, Centurion Online, was supposedly based in an office now occupied by a bus tour company in Manila. The local authorities had no tax receipts or knowledge of a payment processor operating in the area.

Centurion Online, along with ConePay and another company called EasyPay, owed even further millions to Wirecard. That’s all according to documents Mr. Marsalek presented to Singaporean lawyers last year.

Wirecard was quick to blame a “few rogue short traders” when the initial investigation began in Singapore. However, with the company now bankrupt and Mr. Braun under arrest, it’s obvious the time for excuses is now over.

Last week, the company admitted that the $2 billion missing from its account probably never existed and declared insolvency to avoid some of its now huge debt pile.

This whole story is an embarrassment for the German financial regulator, the entire Financial-Tech industry, and any legitimate gambling firms that used Wirepay’s services.

Keep checking our pages for the latest on this story as it develops and other news from the gambling world.

Author

Thomas Wolf

168 articles

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