The illegal broker schemes operated by the German Uwe Lenhoff or the Israeli Gal Barak and his E&G Bulgaria closely cooperated with regulated payment services providers such as Payvision or WIRECARD to launder their illicit funds. Without the cooperation of payment services providers, these illegal broker schemes would not have been able to operate in the first place. Hence, payment services providers involved in those schemes are to be seen as co-conspirators and have to be held liable. In Germany, the public-listed Wirecard was heavily involved in the illegal broker scheme around Option888 and Altair Entertainment for example. The German authorities, however, take a very strange approach when it comes to “their” Wirecard and other illegal German payment services providers – they protect them.
Heavy Accusations Against German Authorities
German authorities are under heavy attack from foreign media such as Forbes or Financial Times (FT) for their weird approach regarding German payment services provider Wirecard, one of Germany’s largest public companies. Instead of investigating the allegations, German prosecutors are attacking aggressively critical journalists, traders and analysts with criminal investigations for exposing alleged fraud and money laundering at Wirecard.
Carlson Block, the Chief Investment Officer of Muddy Waters Capital LLC, a U.S. activist investment firm, published a remarkable article on the Wirecard situation in Forbes recently. In Why Elon Musk Should List Tesla Shares In Germany Block explains why he regards Germany as a sort of safe haven for corporate criminals. Block and his investment firm have a remarkable track record as activist investors. Activist investors are a hygiene factor on the capital market and force dishonest companies and their players to change their behavior. Blocks campaigns, for example, resulted in six de-listings and one indefinite trading suspension by securities regulators, over $100 million in restitution paid to investors, and over $50 million paid to regulators. Hence, Block has quite a credibility when it comes to financial crimes.
The Weird Wirecard Story
Until recently Wirecard had a market cap over €20 billion. As the operator of a global payments business, it has to apply with Anti-Money-Laundering (AML) and Know-Your-Customer (KYC) rules to ensure that illicit money from criminals and terrorists are kept out of its network, which is an important gateway to the global banking system.
For over a decade, Wirecard has been the subject of allegations of fraud and money laundering. In a series of articles that began in late January 2019, the Financial Times (FT) alleged Wirecard committed fraud on multiple occasions. The Financial Times investigation went so far as to uncover documents from an internal investigation that showed potentially fraudulent activity including forged and backdated contracts. Besides the Financial Times, two more financial investigative journalists published critical articles on Wirecard. Leading news outlets such as Bloomberg, Reuters, or The Washington Post started coverage of the case:
The FT’s reporting alleges that suspicious transactions in the millions of euros were flagged internally at Wirecard – which processed some 90 billion euros of payment volumes in the first nine months of 2018 – but with seemingly no resulting compliance action.The Washington Post article “Wirecard Has a $17.5 Billion Question To Answer”
German Prosecutors And BaFin Turn Against Critics
Since the articles were published, German prosecutors expressly stated that they will not be investigating Wirecard. Hard to believe, isn’t it? And it became “stranger than fiction” as Carlson Block pointed out in his Forbes article. The prosecutors are actually investigating the FT reporter and other investigative journalists and the potential perpetrators! The German financial supervisory authority BaFin went even further and actually banned short selling of Wirecard!
BaFin claimed the ban was because of “massive uncertainty” in the market. As Block rightfully pointed out, this is an unparalleled situation in the regulatory regimes of democratic nations. No other regulator so far has banned short selling a single company’s shares simply because of bad news flow
Lesson to learn for enforcement agencies: Investigative journalists and whistleblowers who bring to light financial crime should be embraced, not targeted by enforcement agencies. Without them, perpetrators have their free lunch and authorities have no case.
Germany – Safe Haven For Corporate Criminals
Carlson Block concluded that Germany is turning itself into a safe haven for corporate criminals by pretending the problem is foreign critics, rather than bad actors in Germany. The current situation at Wirecard is weird but seems to follow a scheme. Deutsche Bank has paid so much in fines and is under so much scrutiny by foreign regulators for money laundering that one professor recently called Deutsche Bank “the largest criminal enterprise in Germany”.
Illegal Broker Schemes And German Payment Services Providers
FinTelegram recently reported on the illegal payment service providers which are still active in the illegal brokerage schemes of Uwe Lenhoff and Gal Barak. The German authorities have long since discovered these payment service providers. In November 2018, for example, the German financial market supervisory authority BaFin ordered StronIT GmbH, which is based in Cologne, to terminate its unauthorized payment transaction services. In 2018, the German police raided the offices of B2G GmbH, also based in Cologne, in the context of ongoing fraud investigations against Option888. Nevertheless, both companies have been active since then and have ripped off millions of investors.
FinTelegram has evidence that Wirecard has participated in these illegal broker schemes. We have been provided documents proving, for example, that Option888 customers have been instructed to make payments to Altair Entertainment accounts with Wirecard:
This is a completely incomprehensible, even absurd approach on the part of the German authorities and confirms the accusation raised by Carlson Block. Is Germany really turning into a safe haven for financial crime perpetrators? Finally, dozens of thousands of victims from all over the world of the illegal broker schemes may finally start to challenge this weird approach and the German authorities’ responsibilities. Let alone their reputation!