As someone who often laments about the falling standards and the rise of outrage journalism, it is only fair for me to take a moment and acknowledge that good journalism is hard. It is painstakingly difficult, takes a lot of sacrifices, and can cause extreme mental stress. It is worse when billions of dollars and many reputations are involved. And that is why I can’t but admire, applaud and celebrate the work of Financial Times’ journalist Dan McCrum and his colleagues at FT, who exposed the fraud at Wirecard, the German payments processor that has immolated in infamy.
Wirecard was over two decades old, traded on the German Stock Exchange, and had become part of the DAX 30. Instead, it was a house of cards and one giant fraud. Its revenues and claims were all fake. And it is one of the biggest corporate frauds in European history. McCrum shared his story of unmasking the scam at a Munich-based company today on the FT website. I would urge you to drop everything and read this right now.
When I was reading this story, it reminded me of John Carreyrou’s investigation into Elizabeth Holmes and her startup, Theranos. While Holmes’ fraud was limited to investors and a handful of gullible large corporations, Wirecard was a publicly-traded company. I wonder how many small investors got burned as a result. Of course, there is Softbank, which pumped in a billion dollars into the company, knowing very well that some shenanigans were going on at the company.
Nevertheless, both stories show that it is a difficult job to be an investigative journalist. If you read Carreyrou’s excellent book, Bad Blood, then you know how much pressure was put on him. Ever since he started asking questions about Wirecard six years ago, FT’s McCrum has come under personal attacks, followed by secret service operatives. Some German banking analysts called his work “fake news.” BaFin, the German financial regulators, filed a criminal complaint against McCrum and is equally admirable colleague Stefania Palma. The Theranos and Wirecard investigations are a good reminder of the relevance of a well-funded news organization with legal and other resources to help navigate the tough times’ reporters face.
Wirecard, however, hasn’t gotten as much attention in the technology media as it should – it is an extreme example of what happens when all energy is focused on financial engineering. When the focus is more on valuations and not on value, you get people cooking the books.
As for McCrum, I will bee lining up to buy his book.