How to Spot a Fraud When Everyone's Against You

because that was exactly what I had in mind. Uh, did no one really actually say like, does no one really know actually said that or what? I think? It gets attributed to Cain's but there's some debate about whether or not he actually said it. You'll also see different versions of it. So the market can remain irrational longer than you can remain solvent, or the market can stay

irrational whatever. But it's a situation I think that everyone is kind of familiar with where you look at something and you go, this is absolutely insane, and yet you know, like it keeps rising in value or people keep pouring money into it, and you feel like you're going crazy because no one else seems to see the thing that you see. Yeah, you see this phenomenal. In a lot, someone either calls something right but their way before other people,

they don't make money on it. They if they're short, they get stopped out of their trade long before the market sort of repriced to normal. Uh. And it seems really tough because you're like, you know, if you're if you're in the investment side, you're losing money or you're losing reputation or as you put it, you know, just like starts to feel like you're the one who's going crazy. Yeah, So today I am very very pleased to say that we are going to be diving into maybe the ultimate

example of this phenomenon. But we're gonna be talking about wire Card. Do you remember that company? Yeah? But I never really understood what they did. And so for no other reason because I'm going to finally understand what wire Card did or didn't do maybe didn't do well. All you need to know is that it was supposed to

be this this fancy fintech company. I think at some point it had like a market valuation of almost thirty billion dollars or something crazy like that, and it was this big, like up and coming rising star in Europe and particularly in Germany, and of course it turned out to be a massive fraud. And now, you know, speaking

of going crazy, speaking of reputational damage. Uh, I'm gonna go ahead and say this episode comes with with a big disclaimer, which is there is going to be a lot of media navel gazing ahead, because Yeah, I think in this instance it works because we're gonna be talking to the journalists who actually covered wire Card and you know, doggedly investigated this company any and basically kept saying it's a fraud, there's evidence of fraud, and no one listened,

almost no one listened. And meanwhile, it feels like all of finance, from the accountants to the cell side to the German regulators were really fighting against um the truth about this company actually coming out. It's so it's wild that like this it's even possible, Like do you think the question is like does the company have the business it claims to have? Does the company have the money

it claims to have? And yet even these things we should be sort of like independently verifiably yes or no. It could take a long time for the truth to come out. Yeah, And I'm always personally interested in the sort of what do you call like the inflection points between everyone going Okay, this is fine, and then suddenly everyone going, oh, actually there's billions of dollars or billions of euros missing from this company. It's not so fine. So alright, without further ado, I am very pleased to

say we're going to be speaking with Dan McCrum. He's an investigations correspondent at the Financial Times and also the author of a new book all about wire Card. It's called money Men, A hot start up, a billion dollar fraud, A fight for the truth. And we're also going to be speaking with Paul Murphy. He is the f t S head of Investigations, also my former boss at ft Alphaville and veteran at at Lunching the right way, I would put it that way. All right, Dan and Paul,

thank you so much for coming on our thoughts. Thanks for having us. So maybe just to begin with, shall we let's let's start at the beginning. So what exactly piqued your interest in wire Card down. So this was eight years ago and I was having a conversation with quite a well known Australian heads fund manager, John Hampton, and he just said to me, hey, Dan, would you be interested in some German gangsters, and that was the start.

I just down the name, this funny little company called wire Card, and the best description of it then was sort of a European paper. It did something to do with payments, and it was worth about four billion dollars, And yeah, I didn't think much more of it then. I mean I looked at its business. It didn't really

make much sense to me. And then this other short seller, a guy called Leo Perry, got in touch and we went and met for coffee, and he laid out in front of me these sort of really close written sheets of this theory that hang on a second, this wire Card is a big accounting fraud. So what was the well, what was the ostensible business before we get to sort of the gap between what was going on in what uh,

what actually was going on? What was the ostensible business, what did they claim to be doing, what was the product? And did it have people actually using the surface. So it had this real business and it's a pretty simple business. It processes credit and debtor car payments. So as you have like an online shop selling flip flops, then it would help you get money from customers who wanted to buy your flip flops. It's as simple as that. Lots

of businesses do this. But the thing about WORKUD was it was growing way faster than everyone else and it was also really profitable, quite unusually profitable. And that's the key, right, You can't normally do both of those things. So one of the things that you wrote about very early on was wire cards, I mean basically a roll up strategy wherewith they would buy all these smaller payment processors in far flung places, and they would buy them in kind

of a weird way. Could you talk about that a little bit, yes, So what worker had done was it spent about five years buying up these little businesses all over Asia, you know, sort of a few tens of million here, a few tens of million there, and it said this was part of its big growth strategy, and every time it bought it, it was this big acceleration in the business. But what happens when I went and

looked at those businesses is actually bought. You could see in sort of local filings or local press releases that the numbers didn't match what work I was claiming for them. And then you had a closer look and you like, actually these businesses and really bad shape. You know, the audisers would say this, you know, there's a risk this isn't a going concern. And what it added up to was there was this mismatch between what the company was

claiming and what it was doing on the ground. And you could see little transactions, you know, which seemed like money was maybe going out the side door, and it looked to me like there was accounting fraws. They were just using these these acquisitions to play some tricks with

the accounting as they bought them. You know. It's funny going back to you mentioned that the original catalyst for this was a conversation with John Hampton, and we had John on the podcast I think maybe last October, maybe it was actually in the middle of last summer, and I remember he made a point that was like, any time you see a financial firm growing fast period, that's like a good red flag to begin with it, Like finance is kind of boring, and so if you see

any sort of company in finance making a lot of progress. And of course what was that other company, green Cell was the other one that he was h I think that was actually what we're talking about on the podcast, and of course that also it was a fast growing finance company that that imploded. What did it look like though? You know, when you say okay, there seemed to be some gap between numbers here and numbers, They're like, can you give give a little bit more detail onto what

these discrepancies looked like from your perspective? So why I would do funny things like it would say, hey, we're buying this company in December, and it would actually announce the deal and agree it then, and then it would make a big down payment, so we would say, hey, we haven't actually signed the documents to take ownership of the assets yet, but so because we're you know, we're heading towards as takeover, will make a kind of a deposit like a down payment, and they were claim to

send a bunch of cash out the door, so say ten million euros out of a forty million euro deal, which I would send out before the year end finished. And what that looked like to me was the thing about accounting fraud is your profit looks great, but when the auditors walk in at the start of the year to do the ordit, the first thing they're going to say is can we see the bank balances and they're going to be expect them to be full of cash

because you've just had this really profitable year. So what it looked like was this trick to go, well, the cash is going to be short, will pretend we've sent it out to these guys, and that will hide the fraud. And so every year the deal has got bigger, because when you're do an accounting fraud, the numbers get bigger every year. And one of them, you know, and the

mechanics of that were quite quite complex. But one of the things you can look at with these companies is, yeah, if they're growing really fast, maybe it's too good to be true. And the funny thing about wire Card was it was growing really fast and claimed to be really profitable, but it kept raising money, kept going to shareholders, aren't asking for them to inject some cash, or you know, kept going to the banks and asking for more debt. And that was a big red flag. Paul, Maybe this

is a good place to bring you in. But how how did the rest of the world perceive wire Card at that time, to be frank we didn't know much about it at all. The kind of you know, it was an unlikely subject that Dad had picked up. I knew from my own experience that it's very difficult to tell a story like this of accounty fraud, of balance sheet manipulation, and so I was intrigued by it because I knew he was on a kind of quite a

tough assignment. But you know, it's it. I'm sometimes asked that, you know, how do we choose a subject to investigate to throw kind of resources at the fact of the matter is is that often, you know, the targets of our kind of investigative work just present themselves to us. And this was one of those. Because you know, Dan started writing about it and that the reaction of the company was odd, to say the least. You know, it

was out of kilter. And that's simply you know, I could see it pete Dan's interest and he was going deeper and deeper into this subject. But it also piqued

my interest as well. So this is one of the crazier things about this entire story, which the reaction um that Dad got as he was writing these things, and suddenly it seemed like, I don't even know how to describe it, but I know, you had people attacking you on Twitter, you had the regulators in Germany who eventually started a criminal investigation into you the reporters at the Ft for writing negative things against wire Card, and then you also had at one point people that seemed to

be spying on the Ft. So could you talk a little bit more about that reaction because it seems surreal, and reading the book, it actually does read like a spy thriller in some respects because of the massive reaction you got. Yeah, it was this kind of slow but steady escalation of weirdness, like it almost had like a cat and mouse quality where we would try and write one thing about them, and then the reaction would be weird, and the longer we went on, the weirder it got.

So it started with angry, angry legal letters, fairly standard approach. But one of the first times I sent work questions, they came back and around, hang on a second, are you in league with short sellers? Like either corruptly or you know, am I just naively being used by them to attack this company? It's like, that's weird. We've fit

a nerve here, haven't we. And then we all started getting these phishing emails from hackers who were very persistently trying to get us to give away our passwords, and not just a bunch of journalists at the FT, but you know, other people who could be identified as critics of wyre Card elsewhere. And then we realized private detectives were involved. And then well and then this ampster. You didn't, Paul, you got offered ten million dollars? Were you tempted? Paul? Well? Actually,

I mean I was so surprised by the approach. I wandered back into the FT news room and the news editor at that time as Peter Spiegel, who's who's now in New York, and I said, you know, this has just happened. Peter, what do you think? How should we react? And he said, I want some You just assumed it was a setup. We already knew this was a very

very strange company. You know, aside from all the kind of you know, the phishing emails, the kind of the kind of clown spying operation, we were also dealing with an avalanche of online abuse. You know, Dan was taking you know, was taking the front of it, but it was also any other journalists, other journalists on Alphabel, myself, the editor of course, everybody was accusing us of as of being corrupt in some way, which in itself was

just kind of crazy. You know that it was you know, this was you know, the time, this was kind of pre Trump. It wasn't as though they were, you know, just copying what was happening in America. It was this was this we gradually came to understand this was the wild called playbook. Let's go back to the very beginning, Dan, because you mentioned that in your first conversation, and also I want to talk to about working getting tips from short sellers and allegations of being in league with them.

But before we get to that, you know, you mentioned that the first thing that John Hempton said is like something about gangsters. And we so we every wady we talked about the accounting fraud. But who were the people when he said, are you interested in gangsters? Here's this German company. What are we actually talking about? And what did he see in terms of the people that were involved with this payments company? So there were two theories. Like John looked at it and said, yeah, this looks

like in accounting fraud. There's also this other side to work, because if you're processing international payments, well then there's an awful lot of interesting things you could do with that if you're not worried about the laws. So the suspicion was that wire Card was basically processing payments for every kind of nasty thing online that you might care to imagine. And those two theories sort of we're going on for

quite a long time. And in terms of the gangsters, I mean, I think he might have had in mind the chief executive Marcus Brown, who is this sort of his former KPMG management consultants who just sort of spoken tech goobty book. But what we started to learn, as you know, the more we got into it, that the real weird sort of gangster slashed by behind it was

this bizarre character Yan Marcella. He's kind of like an Austrian whiz kids, like, speaks multiple languages, dropped out of high school to run a tech startup, and everyone goes on about how elaquent and charming. I mean, you had lunch with him, right, I mean, And and he's this sort of charismatic guy who was the heart of you know, everything work I was doing, But there's this weird other side to him, and he comes across as someone who's

like the consummate improviser. He's constantly getting into these scrapes and almost destroying the company. But then he's got this other side to him where even now we're not really sure whether was he a spy or did he have just some sort of James Bond fixation where he's you know, trying to hang out with Libyan militia groups or you know, for his holidays, he likes to go for a stroll around Syria with the Russian Army, as one does, right, Paul, what was lunch like with him? Well, Um, the first

lunch I had was a kind of stilted affair. This was the one where we thought there was a chance that he'd offer me a bribe, and there are other people around the lunch table, and it was it was just a very kind of stiff affair because he was

obviously anxious about meeting me. You know, we were discussing, you know the fact that I knew that his company was running a kind of black operation against the ft because he didn't offer a bribe at that On that occasion, we organized a second lunch together which was just myself and Master Lick, And if I'm prank, he was actually it was a kind of fascinating conversation, mainly discussing telegram the messaging gap, which at the time was planning a

huge token offering. I mean, the guy was interesting. Can I ask a sort of big question and it maybe a little more I don't know if it's philosophical goal or just sort of but like, what's the deal with Germany? They opened it a criminal investigation into people reporting um on you. But also like there are all these other things that go on with Germany, Like there was the car company with the big diesel scandal, and they're always having these trouble with the banks that seemed to lose

a lot of money all that time. Like is there what's the Is there some issue with like German corporate culture or the sort of connection between regulators in Germany and companies such that there isn't checks and balances or aren't auditing sort of domestic auditing, Like why does this why do these big scandals seem to recur there? Well, you do have the old scandal in the US. Joe, Yeah, that's true. We've we've we we we've had a few

I guess yeah, no, Joe, it is something that fascinated us. Okay, so you know, we couldn't. I personally could not understand why the German elite, the German establishment collectively decided that my colleague Dan McCrumb was was corrupt, that we were just kind of we would the f team was just allowing Dan to kind of roll out these kind of you know, defamatory, kind of destructive articles about wire Card.

Why did they believe that? I think it's fair to you know, it's obviously were generalizing here about German business and political and financial society. But there has been over the years a kind of you know, a tendency for them to distrust what we would call kind of Anglo Saxon capitalism. You know, there was the kind of hedge

funds and locusts, all those sort of examples. Also it was the German bank that loaded up on all the garbage, like prior to the Great Financials too, like the greensil didn't they have opened up their own bank in Germany. Like it feels like, you know, I always have this sort of view of Germany is like this sort of uh, small c conservative culture, and yet it seems like they're they're always like running into trouble, particularly when it comes

to finding it well. I think there's an interesting point here about how frauds does exploit trust. So Germany is this very high functioning economy where most people aren't psychopaths, and you get a lot done that way, and it's very efficient if you go about your life and your business assuming the person on the other side of the table isn't trying to rip you off. And that's a good thing. That saves us all a lot of time

and effort checking things that we don't have to. And so there's an argument here that what work and what these big, complex frauds exploit is that element of trust because people literally don't see it coming because it is

so unusual. Now, that doesn't explain everything, because once you start to go, hey, there's some serious evidence here, you know, look at this we you know, we're printing documents that show there's a fraud, and people are still going, yeah, I think it'll be fine, or I think the ft is corrupt. That's still weird, and you need a bit

more of an explanation for it. The thing that amazed me at the time was also the German press really seemed to automatically sort of arrange themselves against the FT, and even I remember one of our former colleagues at the FT who was then working at the handles Blat was they published an article I can't remember what with the exact headline was, but there was a picture of like a credit card, and the caption underneath the credit card was like, I'm an FT journalist, can I pay

for that bribe with credit card? Like basically insinuating, not even insinuating, just stating out right that the FT was accepting bribes in exchange for coverage, which it's just as you know, as journalists and former colleagues, that just seems such a weird position to automatically take yes, and we were quite shocked. There was also the example of the commerce bank analyst putting out a note, you know, an actual you know, research note, saying, oh, Dan's just you know,

Dan's corrupt. We've known that for years, ignored when he's writing,

I mean, you know that. As a young journalist before the Internet, I used to go to UM international press conferences, some of which were held in Germany, and one thing I remember is on the first occasion I went to one was that the chief executive would do a presentation and the assembled German press would all applaud the chief executive, and all the kind of British press would be standing there kind of shaking their head saying what the hell

is going on here? You know, were journalists as you know, we're here to kick the tires, not to applaud the chief executive. And I think it's fair to say that there's there's you know, there's there is a different relationship between you know, the German financial press and the corporate world. It doesn't have, perhaps in areas, doesn't have the same combative relationship that you would see in in New York

or London. There's a funny aspect of this is slightly media and evil gazing, but there's a funny aspect of German privacy law, which which means that sort of the practice of quote approval where you have a conversation with a journalist and then instead of them just writing a point you said up in the story, they then go back to you with here is everything you said. Are you happy with it? And it's a small subtle thing, but it's sort of completely routine in the German media,

partly for reasons of media law. You then sort of have to have this very friendly relationship with your source, you know, respectful. It's quite hard to know do a got tree if you've then got to go back to them and say, did he definitely say this? I mean, I'm not saying all German press does this, and you know some German outlets like Sue Dorgea's item properly did go after work. But you've you've also got to credit

the company with some pretty effective tactics. What they did is they turned it into a battle between the Financial Times and why I can't you know? They cooked up this witness statement from a guy in a nightclub saying that he knew a story was coming, and then go and give it to prosecutors and say, look, FT generalists are corrupt. We've got the evidence. And that's sort of allowed the German press to sort of sit back and go, well,

this is very complicated. There's a lot of allegations flying around, and let's just munch some popcorn and watch this battle unfold. It seks to worst noting just to to add to that, it's worth noting that because the German press reacted in that way, and because you know, Buffin decided to launch, you know, kind of a criminal investigation into Dan himself

and also into our colleague Stefaniam. That meant that the ft had to double down, you know, because you know, the German establishment was questioning the integrity of the Financial Times, and so we were going to stay on that story, you know, we were not going to back away from it.

So their allegation is like, oh, you're corrupt, you're in league with short sellers, and this happens in media like anything you write any negative, anything negative about a company at all, people talking about all you're in league with the short sellers. But you were like initially tipped off by two separate short sellers. So the idea that like there it's not corruption. But you know, for a lot of investigative journalists often that's sort of an initial tip

or something like that. Can you talk about like how you think, I mean, obviously like you probably hear from short sellers all the time, and these days short sellers published their own reports and stuff, But can you talk to just sort of vice philosophically or maybe in terms of journalists best practices about how you think about your responsibilities and reporting responsibility. When you get an initial tip from a short seller who presumably has some interest in

seeing their company implode. Yes, So short sellers are fascinating sources and great sources. And you know, I find the fascinating characters as well, you know, I mean there's a bunch of them in this story, some of whom are really quite interesting in extraordinary. But whenever you deal with any of these guys, you have to be aware of their financial interests. And that's true of pretty much anyone you talk to as a financial journalist. You know, the lawyers,

the bankers, the management have got stock options. Every single person is either getting paid to talk to you or talking their own book. So the idea that short sellers are somehow different in that regard just because they're a bit more cynical than the other ones, you know, it

doesn't really carry much weight. And and the reason why I started talking to short sellers were simply just because I found them interesting people Like I met Carson Blocks, one of the most famous ones, and you know, I went to meet him and he was like completely like anyone else who had met him finance up until that point. You know, I mean, he he comes across in this you know, almost slightly californiaan bro manner whilst also completely

eviscerating fraudulent companies. And he had all these amazing stories of you know, scuttle butts, you know, the rumors that were floating around, who's the who's the CFO of a tech company who's known to every maitre d in San Francisco for splashing money around that sort of terrific little gossip, and I kind of thought, well, this seems journalistically interesting.

And the thing is when the way I deal with them is, you know, if someone comes to me and says, here, I've done a bunch of work and there's something up with this company, that I basically say, thank you very much, take that away and see what I think of it, and can I reproduce it? Is its solid? Can I go and find the documents? Myself is the other evidence?

And there's nothing wrong with that. That's like lots of sources come and tell your things and then you deal with them, and then you just have to be careful about, you know, not then going back to them and saying, you know, you can't go thank you very much. That was amazing. We're going to publish a story on Tuesday, but we don't. You don't do that with other sources where price sensitive stories. I'd added a couple of things

to that one. You know, yeah, it really is no different than talking to say, bid gossips, people speculating or mergers. What you have to be careful of is, you know, the flow of information. If it becomes a two way flow, it starts to look suspicious. The other thing I'd say is that short sellers, certainly my experience, they tend to do deep research and that is part at least partly because the downside for them is infinity. You know, you can buy a stock and the most you can lose

is the money you put on the table. But if you're shorter stock, that stock could go to the moon. And I actually sometimes wonder, you know, if if Dan hadn't brought down wire Card at the point he did, you know what would have happened if wire Card had become one of the meme stocks. You know, what if what if? You know, it was the most shorted stock in Europe, major stock at the time, certainly in Germany. You know, if that stock had been said to the moon,

it would still be there. I suspect they probably would have bought a touch back. Yes, um, that's right, because at one point their market value I think was higher than Deutsche Bank, which again is absolutely crazy. Did any of the short sellers make money on the stock that you're aware of or did it just sort of drag

on for for too long? So, I mean you talked about like how markets can be a rational much longer I think you can be stay solvent right at the beginning, and for some of these guys, they were losing money for years. I mean I talked to them. This very smart guy at wid and Marks who's kind of like like Brazilian. He's like Central Casting's idea of a hedgephone manager, you know, Brazilian. He lived in California for a long

time surfer. When we're doing this, he had long black hair, and when we're sitting there talking he had literally plumbed every avenue that he could to try and expose wire can't and he's like, m you know, I think we're going to have to catch the chief executive at some sort of dodgy party with Harvey Weinstein before anybody is even gonna care, because it was just so frustrating and they were and they just kept losing money. But then

right at the end. So there's this moment in June where work comes out and says, yeah, we the orders aren't going to sign our accounts because one point nine billion euros is missing, and everybody who's been following it knew in that second it wasn't missing. It had never existed, and this company was toast. But the weird thing was

its share price didn't go to zero straight away. It's sort of, you know, it drops like fifty or sixty and then sort of hovered there because there were all these investors who begin so caught up in the idea of work Card that they still thought maybe there was a way back. And that was the moment that all the short sellers took advantage of and sold every single share and put an auction that they could get their

hands off. And so it was that single one or two days after why a Card announced it was all over, that they made back all the money and more and actually made profits on this sort of year's long campaign. So I was actually going to ask what was where were the auditors? And when you started poking around and asking these questions and looking at the you know, what you saw is early evidence of accounting fraud. You know, identifying like is the money in an account or not?

Does not seem like it should be that hard of aum a thing for an auditor or any accountant to track down. Where were they the whole time until they finally came out and said, the money is not there, we can't find it. Dad's best to talk on that. But I just say, rule, you know, a kind of a base rule of financial journalism. Is there ever ever trust the orditor us? You know, just you know, namely one major fraud that has been revealed by an auditor?

Maame what so? I think the best example of this is kind of like the last almost year of wire Card's life. We published this story in October saying this is how they're committing fraud. Here are all the documents, Here are all the names of the fake clients. This isn't real. And so why Card launches this special audit to look into all of these allegations. You know, it's

a company, it gets to investigate itself. So the auditors for a decade e y, and they're bringing this new lot from KPMG, And there are these sort of crazy moments where like they all fly to Manila and wire Card has told them yes, we do have lots of cash. We've got this one point nine billion euros of cash. But it's not an art bank accounts. It's in special

bank accounts in the Philippines managed by a lawyer. So they all go to this lawyer's office and he walks in and he's a divorce lawyer who gives advice on YouTube. He's got he's got like one of those sort of gold plaques on the wall saying he's got a hundred thousand subscribers. And he walked and he walks in, and there's this whole speech about how like he's the friends of the president, and he went to the same fraternity at him as university, and he's a very important and

powerful guy. And then they all go down into some cars to go to the banks where these special accounts are, and they've got some police motorcycle outriders, and there's sort of this bizarre convoy sets off and they don't drive to the headquarters of the bank's nearby. No, they drive to forty minutes to with this little branch road where this tiny outpost to the bank where they can barely

all fit in it. It's supposedly looking after more than a billion dollars of wire cards money, and the you know, the lawyer explains, he just does that because it's convenient for where he lives. This is in the book, by the way, and it's amazing the scene and yeah, I mean, I'm just giving you, like the very potted version of

it here. And the thing that I think is really striking is that the auditors at this point have been sort of so desperate for information and so desperate to like sign off on things, that they're almost relieved that there's something there. It's not like there's nobody here. It's all completely weird, and they seem to have convinced themselves

that yes, why a Card is this chaotic startup. It's grown so quickly, it doesn't have proper processes in place, and a sort of group think sets in because they have been with it the whole way, and they've sort of understood and they've signed off on everything, and they sort of agreed to this weird, chaotic money making magic that why Can generates its profits. They're kind of like, okay, right, we get that this is a bit unusual, but you know, there's something there. We can put a little tick in

our box. Was there ever a moment where, you know, this had dragged on for quite some time, and I know, um the f T as a newspaper, and Lionel Barber, the former editor, was very supportive of you. But there were times clearly where your career was probably strained by all of this. You had criminal charges against you, You had you know, sell side analysts, the accountants, the financial regulators in Germany all saying that this company was fine.

Was there ever a moment where you worried that, you know, the fraud would never come to light. So so there's this moment where worker cooks up a conspiracy and it looks so bad that the Financial Times finally announces that, okay, we're going to conduct an internal investigation into me and

Paul to clear the air. And I very clearly remember that phone call because Lionel called me up to tell me about it, and he'd always said he completely trusted us, he knew we weren't corrupt, and you know, he said, it's obviously going to clear you. I'm not worried about that, but you know, this is just a tactic we have to do to get ahead of work card. Otherwise no one will pay attention to the story which we knew

we had, which was going to kill them. And even though I knew everything he's saying was right, it was you know, when it was like I was hearing in his voice at a distance and it was just sort of this moment of like everything collapsing in and it's like revery ship. I think they're going to get aware of it. And it was also really worrying as well, because at this point, you know, we knew there were

Russian spies maybe involved. There were some pretty nasty characters, and I'd been like cycling home on my bike worrying about, well, if I get knocked off by a bus or something here, that's gonna be very convenient for everyone. You kind of tell yourself as a journalist, you get a certain protection because if that happens to you, that's quite a high profile thing, and that's going to really attract the attention of the authorities more than a easy, teric financial crime.

But in that moment when you're like, okay, so even the fts investigating us, maybe we are for it's like, well, I feel quite exposed and if this doesn't work out, my career is finished. When did the tide turn, Like, what was the thing that I mean you mentioned in that letters came out and said, yeah, the money is missing, But what was what finally turned the tides to get this sort of rethink and suddenly you sort of realized

that people were started believing you. The turning of the tide is related to the As Dan was just saying, this point, when we were investigated internally to check whether we were actually corrupt, we reached a point where we were essentially at kind of hand to hand combat with this company, and both Dad and I were so infuriated that they've managed to kind of to sty me what

we were trying to do. You know, the fact that we were investigated internally allowed wire Card to raise i think one point four billion dollars in cash from we didn't even talk about soft banks, and which is yeah, which is like another just yeah, obviously soft throws up and gives them a billion dollars soft in the head bank.

As I say, you know, kind of when we came out of when we were cleared by the internal investigation, you know, Dan came out of that, you know, the fighting fit, and there was an absolute determination then that we had to you know, put this matter to rest.

We discussed it in dept at the time and how we would do that, and you know, the argument was around we had We knew that we had to put real tangible evidence in front of people, and the way we did that was a decision to you know, do a story explaining how the customers were fake and therefore the cash was fake. But also we we made the decision to actually publish the documents we had. A key thing was an internal spreadsheet. I don't know down how

how many pages along, how many sheets long? Was That spreadsheet was very substantial. It was a sort of document that just couldn't be fabricated. And you also brought together all the chats and emails around that actual document. It was putting that kind of tangible evidence in front of the reader that killed it. That was done in October the fifteenth, I remember the day, two thousand nineteen. We knew at that point that this business was dead. We

knew it was a fraud. In actual fact, it took another kind of seven or eight months to disintegrate, just to wrap the whole thing up. What what's your top tip for spotting a potential fraud? What should people be looking for. There's a famous American short sellet Forward Mark co Holders. He has this phrase I love, which is, there is never just one cockroach in the kitchen. So if you find one, I you're going to find more

of them. Almost as simple as that. If you find that a company that you can look for, you know, financial indicators. Are they growing very quickly but also taking on loads of debts? Are they growing really quickly and really profitable in a way that's too good to be true? You know, all those sorts of like financial things, you know, have they got a big receivables balance which is growing faster than their sales. But when it comes down to it,

are they lying about something? Because if they learn about anything, then they'll probably lie about the lot els. That's a good one, all right. Well, Dan and Paul, it was so good to have you and do do a bit of media navel gazing. So thank you so much and congrats on you know, bringing down Wire Card and also on the book. Yeah, oh, thank you so much. It's terrific.

That was really fun. Thank you so much. So Joe, obviously, I found that conversation very enjoyable and I cannot imagine what Dad actually went through at various points in that entire odyssey. It just seems like, honestly, the entire world was sort of arranged against him. Yeah, it's just so

wild to me, and I think it's really telling. But it's so wild to me that you can have this company in which it's all made up and it takes so long for the truth to come out, even though you think it's like, Okay, someone go check to see if the money is there or if the customers are real. Yes, the money is there, Okay, it's real, No, the customers

are whatever it is. You would think like some of these things would be really binary, and yet despite the binary nous, it could just like take forever for it to actually, uh to actually come out. It blows my mind, but I mean I get how it works. It just you think these things would be faster. Well. I think the other thing it shows is that the system. You know, there are a lot of safeguards built into the system, but those safeguards and the system itself only really works

when everyone is sort of a good faith actor. And I think when when you have a really audacious fraud like wire card, where you have a bunch of senior executives who you know, are not only willing to go on the offensive and say like, oh, these journalists are in league with short sellers. You guys should be pursuing them, not us. And they're also quite willing to hire hackers and start their own, you know, criminal publicity campaign and

things like that. I think, like the system doesn't work when you have those kinds of actors operating in it, and I think that's part of why they were able to get away with it for so long. Also, just thinking back to the auditors, you know, what kind of what kind of company like brings the auditors to the Philippines and goes, we're going to show you the money, and then they they take them to this random bank and they're like, oh, see it's here, Like that is

just such a crazy thing to do. It feels like there's no I mean, obviously the auditors should have been more suspicious of it, But at the same time, if you were an auditor, you'd probably be going like, well, why would you know? This is so strange? It kind of maybe it is true. Yeah, I think we're just not used to people outright lying and we so yeah, you know, you sort of have like a range of like okay, maybe uh, you know, a range of expectations for how people are going to behave And I thought

that was interesting. It's like, okay, by and large corporate Germany is a fairly like high trust, well functioning system, but then that creates the space for companies to just like brazenly lie and you just like don't have your antending you don't have your radar. I also think, you know, Canada sort of seems the same way, where it's like buying are just sort of like high functioning you know, reasons sort of like market system, and then you occasionally,

you know, semi regularly get these like gigantic frauds. It seems to go hand in hand where it's like in the course of a day to day job, even if your job is to like verify the truth on some level, which is auditors, like you're sort of like not really prepared for like pure lie. Yeah. I think that's right, Like I think those kinds of systems only really work

when everyone's acting in good phase. My mind that it could take so long, like it's not you know, it's like some companies the business model is unsustainable and their short sellers like this is an unsustainable business model, but it takes a while for whatever to happen. But the idea is still that, like you can just like make up money or make up customers, and it takes so long for the company it will be forced to admit.

It kind of blows my mind. And you can see how they, like drive journalists crazy markets can stay a rational ger than you can stay solvent. We've come full circle. Uh quote. That's why that's why it's persisted despite it's dubious prominence, because it's so true. Yeah. Alright, um, this has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway, and I'm Joe Wisenthal. You could follow me on Twitter

at The Stalwart. Follow our guests on Twitter. Dan McCrumb He's at f D. Paul Murphy is on Twitter. He doesn't really tweet what his handle is at Murphy p. Follow our producer Kerman Rodriguez at Kerman Arman. Follow the Bloomberg head of podcast, Francesco Leave at Francesca Today, and check out all of our podcasts a Bloomberg under the handle at podcasts for listening to year to