The German Wirecard is something like the drama queen in the international FinTech scene. True to the company slogan “beyond payments”, Markus Braun‘s DAX-listed company reliably delivers spectacular headlines. Most of them are currently negative and are either related to accusations of balance sheet manipulation, compliance problems, or short-sellers. The KPMG audit report presented at the end of April 2020 has caused the Wirecard drama to escalate, again. Since then, the share price has plunged from almost €139 to just under €76. And the drama is far from over, it seems.
The “Non Event” Conspiracy
Wirecard not only has customers and shareholders. The company has devoted fans who defend the share enthusiastically against better knowledge in the various investor forums and in social media. The defense is highly emotional and includes massive attacks against critics such as insults and hate speeches. For these fanboys, the culprits of the Wirecard drama are not Markus Braun and his management team, but rather evil short-sellers who have made the crash of the share an end in itself. Bad news may have its origins at Wirecard, but in the fanboys’ conspiracy world it is attributed to the short-sellers. Any misconduct, no matter how blatant, on the part of Wirecard is degraded by fanboys to a “non-event”.
For outsiders, it seemed as if the German regulator BaFin and the responsible public prosecutor’s office were protecting Wirecard. Critics such as the journalists of the Financial Times were investigated. Evidently, German authorities had bought the “short-seller story” and were taking their role in it. At least since the KPMG audit report was available, the authorities should reconsider their respective roles.
According to our information, Wirecard was also the processor of the payment process behind the GreyMountain Management Ltd (GMM) of David Cartu and his brothers. The Irish GMM acted as Third Party Acquirer (TPA) for Wirecard. The son of the then Wirecard UK & Ireland Director Michelle Molloy, Ryan Coates, was a director of GMM, which was one of the best-known payment processors in the fraudulent binary options industry, claims the so-called Avalanche Project Report by former GMM developer Simon Kinsella.
In summer 2017 GMM was put into liquidation. Currently, more than 30 US investors are suing the company and its former directors for millions of dollars for investment fraud. GMM was the first major partner to vanish.
The latest fall in the company’s share prices was also caused by a vanishing company. The controversial business partner – Wirecard calls it routing partner – Al Alam Solutions FZ LLC from Dubai announced that, due to the damage to its reputation caused by the negative reporting on Wirecard, it would close down the company and transfer its business to other companies in its organization. Already on May 6, 2020, Wirecard announced the closure of its Dubai subsidiary CardSystems Middle East FC LLC, which had a direct business relationship with Al Alam.
The Al Alam partnership explained
As recently as October 2019, Wirecard had presented Al Alam as a reference partner and explained in detail the third-party business using Al Alam as an example (press release dated October 19, 2020). According to this press release
- Al Alam maintains an international network of partner relationships with payment processors and acquirers, which Al Alam has integrated into its technical platform.
- Wirecard’s platform uses an interface provided by Al Alam in the backend and thus gains technical access to the payment and acquiring companies integrated with Al Alam.
- Wirecard currently uses a technical connection to 9 acceptance partners in different geographical regions via Al Alam. This enables Wirecard to offer its customers local payment acceptance via these partner companies.
- In fiscal years 2016 and 2017, over 1,000 primarily smaller merchants connected to Wirecard via marketplaces and PSPs were processed in the backend via the interfaces provided by Al Alam.
Wirecard allegedly had 9 acceptance partners with more than 1,000 merchants (clients) integrated via the Al Alam platform. Surprisingly, the closing of Al Alam is said to have no impact on the transaction volume and thus on the Wirecard business.
Conspiracy theorists on stage please
Conspiracy theorists around the Wirecard stock are busy trying to fit the negative news into the short seller puzzle. They call the closing down of Al Alam a non-event! Strange, isn’t it? Provided that quite a lot of business was routed via this partner until a few months ago.
Slowly but surely, the Third Party Acquirers (TPA) criticized in the KPMG audit report are apparently vanishing into thin air. It will be interesting to hear what the auditor EY has to say about this.