Germany: Fraud Trial of Wirecard Executives Begins

Facts

• Germany's Wirecard fraud trial began on Thursday in Munich, with ex-CEO Markus Braun and former executives Stephan von Erffa and Oliver Bellenhaus in the dock over their roles in the country's biggest-ever accounting scandal.
• Austrian-born Braun, who has been in custody since his 2020 arrest, made his first public appearance in more than two years, entering the courtroom to hear the charges along with the two other managers. If convicted, each of them could face up to 15 years in jail on charges of fraud and market manipulation.
• Former chief operating officer Jan Marsalek, who was responsible for the business with third parties, was a notable absence from the trial. He is wanted on an international arrest warrant and is believed to be living in Russia after fleeing to Belarus in 2020.
• This comes two and a half years after the company's collapse, which was once the crown jewel of Germany's financial technology sector. Wirecard's downfall ensued after admitting to auditor EY that €1.9B in cash, meant to be held in two Philippine accounts, didn't exist following an investigation from the Financial Times.
• A verdict isn't expected before 2024, as there are hundreds of court hearings scheduled through the end of 2023.
• Launched in 1999, Wirecard processed online credit card payments before it expanded into banking, issuing credit and pre-payment cards. In 2018, it joined the Frankfurt Stock Exchange's Dax 30 index, edging out Commerzbank in the process.

Sources: Al Jazeera, Reuters, New York Times, DW, Sky News, and BBC News.

Narratives

• Establishment-critical narrative, as provided by Bloomberg Law. Despite clear evidence of crimes committed by Wirecard, authorities not only failed to detect its unprecedented fraud, but they also intervened on the wrong side by initially persecuting journalists who denounced the company. This failure is partly due to the German siege mentality, political cronyism, and the desire for a digital national champion.
• Pro-establishment narrative, as provided by S&P Global. German politicians and financial regulators must not be treated as scapegoats for the accounting scandal that led to Wirecard's collapse. While they did fail to detect irregularities, so did EY, which is as much as — if not more — responsible for ensuring its compliance. Either way, nobody is more to blame than those directly behind the scheme.