The summary of events:
On January 30 the Financial Times published a story headlined "Executive at payments giant suspected of using forged contracts" by Dan McCrum in London and Stefania Palma in Singapore.
Wirecard issued a statement calling the reporting “false, inaccurate, misleading and defamatory” which is a bit of a word salad.
Also: “This article lacks any substance and is completely meaningless”
On January 31 Reuters reported:
A Financial Times report on alleged wrongdoings at German payments company Wirecard gave no reason to launch a criminal probe, German prosecutors said on Thursday, adding they had launched preliminary investigations over potential market manipulation.Damn, that's moving pretty fast for prosecutors.
The prosecutor’s office in Munich said that Wirecard had contacted the authorities after the FT report, which caused the company’s share price to drop by up to 25 percent on Wednesday...
On February 1 the Financial Times published "Wirecard’s law firm found evidence of forgery and false accounts" by the same two reporters.
Wirecard that same day responded with “inaccurate, misleading and defamatory”, leaving out the "falsch" from the January statement.
On February 7 the FT publish "Wirecard: inside an accounting scandal"
On February 8 Wirecard issued a statement that ended with:
We will use all available legal means to protect the company and in particular our employees and their personal rights. Wirecard is taking legal actions against FT and its unethical reporting.On February 18 Germany's Federal Financial Supervisory Authority (BaFin) issued:
General Administrative Act of the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) on the prohibition on establishing and increasing net short positions in shares of Wirecard AGWhich put us firmly into "what the hell is going on" territory.
Although it's probably not unprecedented, I can't recall any regulator banning shorts on an individual issue. Such a move is in itself a market manipulation akin to the commodities exchanges going "liquidation only" to break the Hunt brothers in their silver adventure.
Also on February 18 the Financial Times published "FT statement on Wirecard reporting"
On March 28 Reuters reported:
German payments company Wirecard said on Thursday it was suing the Financial Times over a series of investigative reports that it said made use of, and misrepresented, business secrets.
Wirecard has filed a suit at the Munich regional court against both the FT and its reporter, Dan McCrum, seeking a ruling on the merits of its case. If successful, the company would then press for monetary redress.
“Our objective is to seek a halt to the incorrect use of business secrets for the purposes of reporting, as well as damages,” Wirecard said in a statement. No comment was immediately available from the FT.....
....Wirecard said on Monday that the final results of a probe by outside law firm Rajah & Tann had found that local staff in Singapore may have committed financial crimes, but that these were not material and there was no evidence that its German head office was complicit.Beg pardon? "May have committed financial crimes"?
And now we are in Cloud Cuckoo Land.
The first red flag is when management start targeting short-sellers.
The second red flag is when you start seeing nonsense in the corporate communications,
As an example, if the reader will indulge me in a short detour. From a 2010 post:
My Favorite Stock Scam Blowhards
After doing this a while you don't even need to call in the forensic accountants to spot the weird ones. A bit of background, Equisure Inc. was purportedly a reinsurer based in Belgium that had, in a remarkably short period of time gone from the NASDAQ bulletin board to the American Stock Exchange by way of a reverse merger with a dormant shell company.
The heart of the scam was to hype the stock by way of news releases to a) gun the stock for the early buyers and b) get the stock on the Federal Reserve Board's list of marginable securities.
That step is a bit more sophisticated than your run-of-the-mill pump and dump because it allows the crooks to borrow against the shares rather than having to sell them. The lack of selling pressure makes it easier to maintain the run-up until the plug is pulled.
Of course the scammers also took whatever petty cash was in the company's coffers.
I never saw a complete accounting but a fair estimate of the EQE take was $100 Mil.
....But first, one of my favorite examples of a stock scam (I told you, I have a morbid fascination with the underbelly of the markets, it's like watching the lions approach the wildebeest at the watering hole, you don't want to see it but you can't look away)
..Peter Uttley, Equisure's chairman and a former Lloyds of London executive, took control of the company this week, assuming the chief executive post....Roger that, consumed in the belly of deception, vomited for the world to see, over.
...Uttley said in the press release that his chairman role had been a "passive" one, but he now plans an active reorganization of the company, whose reputation has been stained by allegations that it is a scam insurance operation....
...In an unusually emotional statement to the press, sent from an Equisure board meeting Friday in London, Uttley told his version of events over the summer, which eventually led to the delisting of Equisure shares on the American Stock Exchange.
"The simple truth was consumed in the belly of deception, but now has been vomited for the world to see," Uttley began.
He then proceeded to tell a story of three men, whom he described as "liars," "cheats," and "scallywags," who worked with law enforcement officials and the press to spread false rumors about the company with the intent of buying Equisure out at 50 cents a share, a tiny fraction of the stock's trading price of $15, before AMEX suspended trading Aug. 1.
Watch for beaucoup bloviating.
Anyhoo here's the editor of the Financial Times with the latest:
Wirecard responded with:Second chapter in our investigation into Wirecard, Germany’s one-time fin-tech darling. We are making it free to read as a matter of public interest https://t.co/gQzlBFSobj via @financialtimes— Lionel Barber (@lionelbarber) March 29, 2019
Wirecard Statement 29 March 2019
Today’s FT reporting is part of a larger package of incorrect and misleading information which has been published by the FT since January 2019. We have already commenced legal proceedings against Dan McCrum and the Financial Times in the Munich Court in relation to the repeated and continuing disclosure and false representation of confidential information and/or company secrets as well as misquoting of documents.
The inaccurate information published today has been deliberately misquoted by the FT to further distort fact and fiction....Distorting fiction?
And a little pre-earnings hype from the CEO:
Oddly enough, after the close of the U.S. markets today I found myself reading about the securities fraud case that opened the floodgates for actions against the professionals usually found in proximity to the fraud; underwriters, lenders, lawyers, auditors...There is no doubt in the effectiveness of our operations and we are very much looking forward to share the great results at the end of April. #TechFuture— Markus Braun (@_MarkusBraun) March 29, 2019
Especially auditors.
That's a story for another day.
If interested see also:
Duuude, This Paul Murphy Fellow Is Taking No Prisoners
Free Dan McCrum
But first, who is Dan McCrum?
Sometimes there's a man... I won't say a hero, 'cause, what's a hero? But sometimes, there's a man.
And I'm talkin' about the Dude here. Sometimes, there's a man, well, he's the man for his time and place. He fits right in there.
Sometimes there's a man, sometimes, there's a man. Well, I lost my train of thought here.
But... aw, hell. I've done introduced it enough.
Where to begin?
