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Any story about fraud is always two stories. How did they do it, and how did they get caught? As disgraced US president Richard Nixon demonstrated and as Washington pundits like to remind us, it's often not the crime that does the damage. It's the cover-up.
There's a perfect example of this early in Money Men: A Hot Start-Up, a Billion-Dollar Fraud, a Fight for the Future, when its author, the Financial Times journalist Dan McCrum, is ingesting lessons in fraud detection from hedge fund investor Leo Perry. Where there are fake profits, Perry tells him, there will be fake cash -- that is, an absence of cash in the bank where the profits should be. Auditors will notice and query that absence. To cover it up, you have to plausibly 'spend' that fake cash on fake assets. Look closely at the fake assets, and there's proof.
Back in 2014, when Perry is schooling him, McCrum has found a company called Ashazi Services, which was supposedly paying £4 million a year for a software licence despite an online profile listing "operations it didn't have [and] a partner who'd never heard of it". A visit to Bahrain to check the company out finds little but denials and a closed office at the company's supposed address.
All this is interesting because the beneficiary of the £4 million was the German payments processor Wirecard, McCrum's real target. At the time, Wirecard appeared to be a fast-growing success: in 2017 it was listed on the Frankfurt Stock Exchange; in 2018 it was added to the DAX index; and, incredibly, in 2019 it attempted to buy Deutsche Bank -- a deal so substantial that "problems with Wirecard's balance sheet would disappear".
McCrum began publishing a series of blog posts outlining the results of his investigations at FT Alphville in 2015. It took until June 2020 for Wirecard to file for bankruptcy, unable to account for £1.9 billion missing from its accounts. Munich prosecutors filed charges against former CEO Markus Braun in March 2022. If convicted, he could go to prison for 15 years.
Money Men is the story of the many stages of the company's fraud -- and why it took so long to expose. For much of the book, McCrum and his fellow journalists struggle to fight past Wirecard's aggressive response to their work: they were followed, spied upon, hacked, sued and dismissed by German regulators, who regarded Wirecard as a national challenger to Silicon Valley's finest.
McCrum structures this sprawling and complicated narrative by alternating between the history of Wirecard he has unearthed through interviews and documents, and the personal story of his investigations into the company. To follow all this, it's crucial to pay attention to the dateline, share price, and market capitalisation noted at the beginning of each chapter. As well as he writes, I was grateful for the helpfully supplied cast-of-characters list and index.
What emerges is a company that's competitive with Silicon Valley in the wrong way, with company executives and their shenanigans verging on the bizarre. For example, when COO Jan Marsalek, who keeps a cardboard cut-out of Donald Trump and a MAGA hat at his desk, hears that the US has issued federal indictments for money laundering against a dozen people working in online poker, he immediately orders an underling to hire one of them because he "knows everyone".
Meanwhile, Wirecard's Markus Braun joins Theranos's Elizabeth Holmes in illustrating a new rule of thumb: whenever a high-level executive in a company you're invested in starts dressing like Steve Jobs -- sell, and run as fast as you can.