• How the Biggest Fraud in German History Unravelled (2/3)

    From Socialist Democrats@21:1/5 to All on Sat Mar 11 19:15:40 2023
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    Gill contacted his supervisor in Munich, who told him to commission an
    internal investigation—which turned up instances of round-tripping,
    backdated contracts, and other illegal schemes. But when the findings
    reached Wirecard’s board, the concerns were quashed. “I think Jan
    understands very well what it’s about, but they don’t shit in each other’s bed,” Wirecard’s deputy general counsel wrote to Gill, on an encrypted communications app. A few months later, Gill was told that if he didn’t
    resign he would be fired.

    By the morning of January 30, 2019, the story was complete and ready to
    run in the F.T. McCrum sent off questions to Wirecard, and waited for the company’s response.

    At lunchtime, Paul Murphy went to Sweetings for a crab sandwich and a
    glass of white wine. Then Gary Kilbey called. A broker had stopped at
    Kilbey’s office, above his night club, to let him know that a popular spread-betting account was “shorting the absolute bollocks off Wirecard,”
    as he put it. The hot rumor in the London finance scene was that the F.T.
    would publish a hit piece at 1 p.m. “You’ve got a fucking leak,” Kilbey

    Murphy rushed back to F.T. headquarters. “We’ve got a fucking leak!” he shouted.

    How had the story slipped out? McCrum and Murphy had taken unusual precautions—speaking about the story only in person, never on the phone.
    The story hadn’t even been uploaded into the F.T.’s internal system. But
    one of Kilbey’s details was off: the F.T. planned to publish that
    afternoon but had never settled on an exact time—1 p.m. was the deadline
    it had given Wirecard for comment. It seemed impossible that anyone but
    the company had been the source of the disclosure.

    Murphy went over to a Reuters terminal and pulled up the Wirecard stock listing. “We literally sat there watching the share price drop as it
    approached one o’clock,” he told me. “And then there was no story, so
    people started buying.” They waited two more hours for Wirecard to reply.
    Then, as Murphy put it, “you hit Publish, and then you almost throw up.”

    The headline said “forged contracts”; the subtitle, “Falsification of Accounts.” The article wiped five billion euros from Wirecard’s value in a single afternoon. A follow-up piece, published two days later, knocked off three billion more.

    The response in Germany was reflexively defensive, as if the F.T.’s
    reporting were an attack on the country itself. “Another fake news article
    from Dan McCrum,” a Commerzbank equities analyst wrote, in a letter to investors. Any dip in share price was “a buying opportunity.” “I read in
    the FT what a naughty boy you are,” a member of Deutsche Bank’s
    supervisory board wrote to Markus Braun. He added a winking emoji, and
    said that he had just bought Wirecard shares. “Do this newspaper in!!”

    On February 18, 2019, Germany’s financial regulator, known as BaFin,
    issued a ban on creating new short bets against Wirecard, citing the
    company’s “importance for the economy.” “It was at that moment that they
    sided with criminals,” a German parliamentarian later said. The same day, prosecutors in Munich confirmed to a German newspaper that they had opened
    a criminal investigation. But they weren’t going after Wirecard—they were
    going after the F.T.

    In a functioning marketplace, the magnitude of short selling tends to
    correlate with the egregiousness of the financial irregularities in
    question. “We conduct investigative due diligence over the course of
    hundreds and even thousands of hours,” a young fund manager named Fahmi
    Quadir wrote to BaFin, in the aftermath of its short-selling prohibition.
    Such investigations involve visiting offices and monitoring satellite
    images to see if, for example, activity at a supposed factory in China is actually taking place. “People think that investors spend all their time looking at charts and data. But companies are more than that—the core of a business is human,” Quadir has said. “Executives are driven by a certain
    set of emotional factors, and stressors. You can’t pick out these things
    just from wading through financial statements.”

    Quadir grew up on Long Island, as the second daughter of Bangladeshi immigrants, and studied biology and mathematics in college before getting
    a job in finance—an industry that she holds largely in contempt.

    Working as a researcher for a hedge fund, Quadir investigated and
    ultimately contributed to the downfall of a pharmaceutical price-gouging operation, earning her the nickname the Assassin. She places no long
    bets—only shorts on companies that she believes to be engaged in criminal activity. “At the end of the day, predatory, fraudulent, criminal behavior
    is bad for business,” she has said. She considers her role of exposing
    fraud, and subsequently profiting from its collapse, “a way to use
    capitalism and capital markets in a subversive way,” something between a
    “civic duty” and a “revolutionary act.”

    In January, 2018, Quadir launched her own fund, from a co-working space in Manhattan. She named it Safkhet Capital, for the Egyptian goddess of mathematics, and hired as her only employee Christina Clementi, who had recently taken a course at Yale on the history of fraud, taught by Jim
    Chanos. By then, Wirecard had acquired Citigroup’s North American prepaid- debit-card program. To Quadir, this was a reckless move: if the company
    was committing crimes, they would now be taking place on American soil.

    “In finance, globally, you have a situation where the only effective
    police are the Americans,” Paul Murphy told me. “Our regulators—they’re
    out to lunch. Incompetent, mainly.” He added, “What you’ll find, say, here
    in London is that you can be a crook, stealing money from people around
    the world. As long as you’re not stealing from people in Britain, you can
    do anything.”

    In early 2019, Quadir and Clementi set off in Clementi’s 2002 Volkswagen
    Cabrio for Wirecard’s U.S. headquarters, which were registered in an
    office park in Conshohocken, Pennsylvania, outside Philadelphia. In Suite
    5040, they found an office space large enough for perhaps six hundred employees. But only a couple of dozen people were there.

    A man who greeted them offered to sell them prepaid cards loaded with up
    to a hundred and fifty thousand dollars, and added that it would be
    perfectly acceptable for them to distribute the cards to other people.
    Quadir and Clementi were stunned. “You can’t find prepaid cards loaded
    with more than ten thousand dollars on the dark Web,” Quadir told me.

    Quadir and Clementi cultivated confidential sources in the payments
    industry, and developed a working theory: that the company’s primary
    business purpose was to serve organized criminal networks and Russian oligarchs—to be a “one-stop-shop” for “large-scale money laundering
    operations that would require scale to support billions in dirty money, annually,” they wrote, in a presentation for Safkhet investors. The key
    was Wirecard’s banking license, which enabled it both to accept criminal
    funds and to obscure their source.

    For Wirecard’s leadership, Germany’s criminal investigation into the
    Financial Times did not come as a surprise—Marsalek had supplied its first witness. For three years, he had maintained a relationship with Gary
    Kilbey’s son, Tom. “It was quite a difficult period,” Gary Kilbey told me.
    “Jan was promising him the world.” It paid off: Tom had been at his
    father’s office when the broker walked in and shared the rumor that the
    F.T. was publishing its hit piece at 1 p.m. Now Tom reported it to
    Marsalek, who wanted affidavits from everyone in the room. “Don’t you
    fucking get me anywhere near it,” Gary Kilbey replied. But Gary’s
    daughter’s boyfriend—fresh out of prison for laundering money for a drug- dealing gang—had witnessed the scene with the broker, and he offered to
    make a statement.

    In February, 2019, Marsalek met with Munich’s top public prosecutor, Hilde Bäumler-Hösl. He told her that he had spent years infiltrating the London spread-betting scene, as a matter of “enemy reconnaissance,” and that the
    F.T. was colluding with short sellers. Three days later, Bäumler-Hösl
    issued a statement to the German press: “We received serious information
    from Wirecard that a new short attack is planned, and that a lot of money
    is being used to influence media reporting.”

    This was not the only defensive action that Marsalek took. Wirecard signed
    an agreement with Arcanum Global Intelligence, a strategic-intelligence
    firm whose leadership is made up of former senior British, American,
    French, and Israeli intelligence and military leaders. Representatives for Arcanum insist that the firm’s work for Wirecard consisted only of an
    internal investigation into Pav Gill’s leak of confidential information
    from the Singapore branch. But on February 5th, days after McCrum’s first article about the Asia division, Arcanum’s founder, Ron Wahid, sent
    Marsalek a proposal, titled Project Helios, to “investigate and identify
    short sellers” and to carry out a multi-stage “plan of attack.” Although Arcanum’s leadership claims that the proposal was never executed, a letter written by the firm, addressed to the U.K.’s Financial Conduct Authority,
    says that Arcanum was “retained by Wirecard to investigate a series of
    short selling attacks.”

    “Phase I will be a ‘scoping and disclosure phase’ where all existing information and initial intelligence findings are reviewed,” the proposal
    read. The next phase would include “more targeted and in-depth
    intelligence collection and analysis.” Targets’ “wrongdoings and vulnerabilities” would be “judiciously pursued.” For a fee of two hundred thousand euros a month, former “senior leaders from the world’s most
    powerful intelligence and law enforcement agencies,” as Arcanum put it,
    would deploy their combined networks and expertise in the service of

    McCrum had continued to investigate Wirecard’s activities in Asia. Half of
    its global sales appeared to come through three clients: one in Dubai, one
    in Singapore, and the third, called PayEasy, in the Philippines. McCrum’s colleague Stefania Palma set off for Manila, to check out PayEasy. Its
    supposed headquarters turned out to be shared with a bus company. Another Wirecard partner, ConePay, was a private home in a remote village
    surrounded by rice paddies. Palma was greeted by two Filipino men, who
    were grooming a small white poodle and a Pomeranian. Neither of them had
    heard of ConePay. Then a family member produced a few scraps of mail. One
    was a document from Wirecard Bank, addressed to ConePay International,
    showing a balance of thirty euros.

    By now, Marsalek had fully entrenched himself in the affairs of his
    Russian mercenary friend, Stanislav Petlinsky. Wirecard arranged a deal
    with the R.S.B. Group’s holding company in Dubai, to sell the mercenaries
    its prepaid-debit-card software. In an encrypted chat with Dagmar
    Schneider, a senior member of Wirecard’s finance team, Marsalek wrote that
    if auditors had questions about R.S.B. they should call Vladimir Putin. As McCrum and Palma closed in on the fraud in the Philippines, Marsalek joked
    with Schneider about having people “shot by MY Russians at RSB.” The
    following week, he wrote to her that he had “been struggling with the FT
    since 5 in the morning.”

    “Send YOUR Russians to London,” Schneider replied. “They should give us
    some peace.”

    McCrum and Palma published their investigation into Wirecard’s partners on March 28th; two weeks later, BaFin filed a criminal complaint against them
    for “suspicion of market manipulation of Wirecard shares.” Outside
    investors took the German government’s actions as a powerful signal. In
    late April, the Japanese company SoftBank, which runs the world’s largest tech-focussed venture-capital fund, invested a billion dollars in
    Wirecard, in exchange for bonds that could be converted into a 5.6-per-
    cent stake. But the F.T. stories still rattled the SoftBank team enough to
    ask to see lists of Wirecard’s biggest clients in Asia—which Marsalek

    Wirecard treated every short seller as an existential threat. In 2016,
    Marsalek had approached Nick Gold, another of Gary Kilbey’s contacts in
    the London spread-betting scene, and offered him three million pounds to persuade a rich friend to stop shorting Wirecard. Gold declined; he found Marsalek boring, he said, and thought that the way he held his cup of
    coffee suggested that he was “a loser.” Only a crooked company, Gold said, would send a senior executive to hunt down its critics.

    Three years later, a British former undercover cop, who now works as a
    private investigator and goes by Jon, was hired to work for a client who
    had set up temporary residency at the Dorchester hotel, in London. The
    client was well built, with close-cropped hair and an even stubble. He was
    of Libyan background, but had grown up in France, spoke flawless English,
    and tipped the hotel staff with high-denomination notes. “He wanted countersurveillance on himself when he was in the U.K., to make sure that
    no one was following him,” Jon told me.

    Jon doesn’t like the term “private investigator,” because he thinks it diminishes the scope of what he does. On an average day, he collects the
    travel histories and police files of five to ten targets, through contacts
    in the public sector. They don’t know his full name—they just know not to
    ask questions, and that they will be paid in cash. His clients include businesses, government agencies, and billionaires, and his duties range
    from spying on philandering spouses to helping international criminal
    gangs insure that a stolen passport can be used to get a murderer across a border. “There’s a lot that is very questionable that I can do, that I
    have done,” he said. “In the police, you have to have morals—or you’re
    meant to. That’s the whole point of being a police officer. And then you
    come out into the private sector and—let’s be honest—it really doesn’t
    matter.” For almost four hours, he spoke candidly, on the condition that I neither publish his full name nor describe him physically.

    The client at the Dorchester introduced himself as Rami, but Jon didn’t
    know his business. After a couple of months, Jon found the man’s full
    name, Rami El Obeidi, and learned that he had briefly served as the head
    of foreign intelligence for Libya’s transitional government, during the revolution.

    Like Marsalek, El Obeidi wore high-end Italian clothing brands, and he
    moved with ease through the strange world of former military and
    intelligence officers. He was apparently a major Wirecard investor, and a regular visitor to Marsalek’s secret mansion near the Russian consulate in Munich. To protect his financial interests, El Obeidi had come to London
    to run an intelligence operation of his own. The main target was Nick
    Gold, who had somehow been named as a suspect in BaFin’s complaint,
    alongside Dan McCrum.

    Gold had made a fortune selling industrial supplies, and gambled it
    wherever he thought he had an edge. He was handsome and athletic, with
    dark, flowing hair—a generous, charismatic party host in his forties who
    did lots of cocaine and dazzled guests with card tricks at his mansions in London, Miami, and Cannes. “I used to go up to Oxford Street when I was seventeen and I would hustle people,” he told me. “Some sucker would come,
    like you, and you’d lose.” In the decades since, he has been banned from casinos for counting cards, and from betting on horse racing for
    coördinating with jockeys to throw races. Once, before betting on how long
    it would take for a soccer match to reach its first throw-in, he paid off
    a player to kick the ball out of bounds in the opening seconds of the
    game. “It’s not gambling if I know the outcome,” he insisted. “I’ve never gambled. I’ve never played a game I thought I could lose.”

    Paul Murphy met Gold at Gary Kilbey’s sixtieth-birthday party, a raucous gathering at which Kilbey urged his guests to “drink as much as you can
    take.” Murphy had heard that Gold was a partial owner of the Box, a high-
    end cabaret club in Soho, where the hostess reportedly welcomed guests to
    the 1 a.m. burlesque show with instructions to “answer every fetish” and
    “do all the cocaine you can.” As Gold remembers the encounter, Murphy gave
    him his number and invited him to call if he ever had a newsworthy tip. Murphy’s recollection was of something more instrumental: “I wanted to
    send in a young, blond, female reporter to harvest crap from him.”

    One day, Gold called Murphy, to pitch a story about a sports-betting
    company. But Murphy told him that he had no time to talk—he was tied up
    with Wirecard matters. “The minute he said, ‘I’m stuck on Wirecard,’ I
    knew this was a no-brainer scenario,” Gold recalled. “I have to short sell
    this company within an inch of my life. Which I did.”

    That summer, a mutual acquaintance of El Obeidi and Gold’s, a soccer agent named Saif Rubie, casually bumped into Gold at a party in Cannes. Gold, as
    he recalls, was “dancing on tables and being a lunatic, as I am—having a
    great time” when Rubie approached him and said that he was working for a
    group of foreign investors who were looking to invest billions. Gold
    invited Rubie to bring the investors to his office in London the following week.

    On the morning of July 17, 2019, Rubie walked into Gold’s office,
    accompanied by a man from Lancashire who claimed to represent the foreign investors. In fact, he was a private-intelligence operative working for El Obeidi, carrying a hidden recording device. Gold suggested a bet against Wirecard, claiming that the F.T. was about to publish a story that would
    send the share price to zero. “It could be tomorrow, could be—you never
    know,” Gold said. The tip was solid, he assured them: his source was the investigations editor, Paul Murphy.

    By coincidence, Gold’s timing was right. A few hours after that meeting,
    Dan McCrum sent Wirecard a series of questions, revealing he knew that
    most of the company’s operations in Dubai were centered on fake customers. Marsalek, who had already received a copy of the Nick Gold recording from
    El Obeidi, summoned a public-relations expert, who suggested that they
    share the recording and McCrum’s suspiciously timed questions with Sönke Iwersen, the head of investigations at Handelsblatt, the German newspaper.
    The private investigator from Lancashire spoke to Iwersen on “deep
    background,” to supply details without being named. He mentioned that he
    had been working for a Wirecard investor but omitted that the investor was
    a former Libyan spy.

    Wirecard’s lawyers wrote to the F.T., saying that Wirecard had passed
    evidence of insider trading between Nick Gold and Paul Murphy to the
    British and German authorities. The letter demanded that the paper not
    publish any Wirecard stories until investigations were complete.

    Murphy immediately texted Gold and told him that he had been recorded.
    “Paul, you’re a brilliant reporter, but you’ve just done something really dumb,” Lionel Barber, the editor of the F.T., told Murphy. Murphy offered Barber a full audit of his finances. But it wasn’t enough; the reputation
    of the paper was on the line. For four years, “I had told the compliance people, the lawyers, ‘Get lost, we’re doing this story,’ ” Barber told me.
    “But when this came up I had to do something.” He hired outside counsel to investigate Murphy and McCrum. “You’re going to have to spend some time in
    the sin bin,” he told Murphy.

    Wirecard, now emboldened, delegated legal authority to the Arcanum
    officers to act on its behalf “in any such way that they consider
    necessary and lawful.” Arcanum’s vice-chairman at the time, Keith
    Bristow—who had served as the first director-general of the U.K.’s
    National Crime Agency—met with the Financial Conduct Authority, as part of Wirecard’s effort to get the agency to investigate the F.T. (The F.C.A. declined to comment on its relationship with Arcanum.) Arcanum’s
    leadership includes a former director of national intelligence in the U.S.
    and a former head of the British Army. The group capitalized on its
    connections even when it had no clarity on the origins of the information
    it shared. Although the Arcanum team had apparently never heard of El
    Obeidi, it drafted a letter to the British authorities in which it claimed
    to have “considerable knowledge” of the “events and subjects of interest” leading up to El Obeidi’s sting operation on Gold.

    That fall, El Obeidi hired twenty-eight operatives to set out on the
    streets of London, on a mission called Palladium. The ground team was led
    by Hayley Elvins, a former MI5 officer, and the operatives communicated
    with one another through a private walkie-talkie channel. There were a
    number of targets—all short sellers in London. Jon was now assigned to
    follow Gold.

    From time to time, Jon learns too much about an operation, and begins to question his role in it. “If there was just six of us watching him, I
    would have just gone along with it,” he told me. “And, looking back, in
    some ways I wish I had.” The team was instructed to use only legal
    practices, so that any intelligence collected would stand up in court. But Palladium felt disproportionate. It had a running cost of eighteen
    thousand pounds per day, and employed some of the most comprehensive,
    hostile surveillance methods Jon had seen. “I felt terribly sorry for
    him,” he said of Gold. “You know, I still have a conscience.”

    One day, Jon called Gold’s housekeeper from a burner phone. He said that
    he was a police officer, and needed Gold to call him about an ongoing investigation. Gold called him back almost immediately. “They’re doing a
    huge surveillance operation on you,” Jon told him. “I think you’re going
    to get fucked over here, royally.”

    Gold summoned Jon to his office. “I’ve been, you know, in the business
    long enough to know when someone’s high on coke,” Jon said. “He was high.
    And he goes, ‘Right! One of my contacts at the Financial Times is Paul
    Murphy. You’ve got to tell him about the surveillance operation!’ ” They
    went to Claridge’s, an upscale London hotel, to meet Murphy. Jon supplied
    him with Palladium documents and told him what he knew of the operational structure.

    Murphy asked Jon to prove his access and credentials. At that point, Jon remembered that, for a previous job, he had spied on another F.T.
    reporter, a man on Murphy’s team named Kadhim Shubber. Moments later, as
    Murphy recalled, “he sends me a fucking picture of Kadhim’s mum’s

    “It made me chuckle,” Jon told me. He also had a copy of Shubber’s bank
    card. “But I wasn’t trying to show off. I was just, like, Oh, what a small bloody world this is!” he said. “Like, how fun is this? I’m talking to
    Paul Murphy, who sat across from Kadhim, who I’ve gone and looked at—like,
    what are the chances? I found it quite ironic, really.”

    Now Murphy reached out to Elvins, the former MI5 officer who was running
    El Obeidi’s operation on the ground. “I tried to flip her,” he told me. “Unfortunately, I did it at about eleven o’clock at night, and I’d had a
    couple of drinks.” He texted Elvins that he could “obv see the damage to
    your firm we are about to do,” and added, “Work with me and I promise we
    won’t fuck you over.” Her reply came in the form of a complaint from her lawyers. Barber summoned Murphy to his office, and Murphy offered to
    resign. When Barber refused his offer, Murphy grew defiant. “You know,
    these stories—they don’t just float in through the fucking window!” he

    “Paul, I want the fucking fraud nailed,” Barber replied. “I want the
    story. And the story is not that you’re texting some ex-MI5 agent at
    eleven o’clock at night!”

    After two months, the external law firm cleared Murphy and McCrum. All
    summer, they had been quietly preparing the paper’s final blow—a straightforward piece that presented tangible proof of fraud and included
    all the underlying Wirecard spreadsheets and e-mails. The instructions
    from Lionel Barber were to “draw blood.”

    The piece was published on October 15, 2019. “And we just thought, We
    killed it—that’s it,” Murphy recalled. The story was so damning that
    investors called for a forensic audit, and Wirecard acquiesced. But the investigation would take six months, and Braun, Wirecard’s C.E.O., assured stock analysts that it would put to rest any concerns. At that point, “the fucking share price goes up,” Murphy said. “Everybody in Germany was
    saying, ‘Oh, yeah, the F.T. are full of shit.’ And also, at this time,
    people like Nick Gold actually were going mad. They were having psychotic episodes. He was found near death, slumped over his steering wheel.” (As
    Gold tells it, he had mixed alcohol and Xanax and pulled over for a nap on
    the side of the road.) “Nobody knew who to trust,” Murphy continued. “In
    this entire broad community that believed Wirecard was a fraud—and by this
    time it was kind of a wide community—everybody was fucking paranoid about everybody else.”

    In the following months, the attacks on short sellers grew increasingly personal, and even violent. Fahmi Quadir was punched in the head by a
    masked man with brass knuckles while walking her poodle on the Upper West
    Side; she was knocked unconscious, and the assailant, who stole nothing,
    was never found.

    It also appeared as if operatives were collecting detailed information on
    Nick Gold’s trades; in the next few months, all his leveraged bets were liquidated, with losses into the tens of millions of pounds. “My name was tarnished. Banks were now shutting me off, overnight,” Gold recalled. “My
    wife left me.”

    One night, at the Box, “I’m doing coke, I’m off my mind, I’m going
    drinking like a lunatic, and I walk out with the hottest girl you’ve ever seen,” he told me. “Fifteen out of ten.” But it was a trap; a blackmail recording of the liaison arrived by e-mail. “The worst part was that I had
    my socks all the way up,” Gold, who is now sober, said. “You don’t want to
    be seen fucking with white socks up at my age.”

    In the year leading up to Wirecard’s collapse, in June, 2020, the
    leadership plotted a takeover of Deutsche Bank—an acquisition so huge that Wirecard’s balance-sheet fraud might be buried in the deal. “It was
    essentially Braun’s last roll of the dice,” Murphy said. Wirecard’s
    desperation continued. The auditors focussed on two bank accounts in the Philippines, which purportedly held the missing two billion euros. covid restrictions complicated the auditors’ ability to visit the banks in
    person, so Wirecard reportedly hired Filipino actors, posing in fake bank cubicles, to attest to the funds on a video call. But the auditors
    persisted, and asked Wirecard to prove that it controlled the funds by transferring four hundred million euros to one of its accounts in Germany.
    When Wirecard failed to perform the transfer, the auditors contacted the Philippine banks directly—both of which replied that Wirecard’s accounts
    did not exist. Days later, Braun was required to announce the auditors’ findings. Wirecard’s share price plummeted eighty per cent, and the
    company was soon forced into bankruptcy.

    Fahmi Quadir’s short bet cleared tens of millions of dollars. A couple of larger funds made hundreds of millions. Other short sellers made no money, because they were too early. “We consistently underestimated people’s
    ability to look the other way,” Leo Perry, the fund manager in London,
    told McCrum.

    In Germany, there was a raft of resignations and firings: Felix Hufeld,
    the head of BaFin; the head of Germany’s audit regulator; several leading Wirecard analysts at other European banks. A German parliamentary inquiry
    held a hundred witness hearings and reviewed nearly four hundred thousand
    pages of documents, concluding that the behavior of Wirecard and its
    enablers was “the largest financial scandal in the history of the Federal Republic of Germany.” The report blamed “collective supervisory failure,”
    “the longing for a digital national champion,” and “the German mentality
    toward non-Germans”—specifically, Quadir and McCrum. “German supervisory authorities are not fit for the ‘Internet Age,’ ” the report concluded.
    Olaf Scholz, Angela Merkel’s finance minister, who oversaw BaFin, told the parliamentary inquiry that he bore no direct responsibility for what had
    taken place under his watch. Later that year, he became the Chancellor of Germany.

    Markus Braun was arrested in Munich, and charged with fraud. He maintains
    that he is an unwitting victim of a scheme orchestrated by Marsalek and
    others. The trial is ongoing. Oliver Bellenhaus, who ran Wirecard’s fake partner in Dubai, recently testified that the company’s partnerships in
    Asia were “a sham right from the beginning.”

    “You cannot understand Wirecard if you understand Wirecard only as fraud,” Felix Holtermann, a financial reporter at Handelsblatt, told me. “It’s not
    a Potemkin village, it’s not a Bernie Madoff case.” According to
    Holtermann, who has also written a book about the company, Marsalek
    routinely “used his power to override Wirecard’s very, very small
    compliance department” to issue bank accounts, credit cards, and debit
    cards to Russian oligarchs who were on European financial blacklists.
    “Germany was, and still is, the money-laundering saloon of Europe,” he
    said. “Only the biggest washing machine broke.”

    In the past two years, investigations by journalists, prosecutors, police,
    and intelligence agencies have turned up an array of astonishing facts
    about Marsalek’s activities outside Wirecard. At his secret mansion near
    the Russian consulate, he regularly hosted gatherings with government
    officials and spies. They came from Russia, Austria, and Israel—but never,
    it seems, in any official capacity.

    Marsalek was also dabbling in political affairs. A major issue in the
    lead-up to Austria’s 2017 elections was migration from sub-Saharan Africa
    and the Middle East. Marsalek—who was connected to members of Austria’s
    far right—started developing plans to assemble a fifteen-thousand-man
    militia in southern Libya, to prevent migrants from reaching Mediterranean shores. Organizational meetings were held at the mansion in Munich, and included current and former senior members of Austria’s defense and
    interior departments. The project’s security adviser was Andrey Chuprygin,
    a former Russian lieutenant colonel and a professor of political economy
    who is widely suspected, in Western intelligence circles, of maintaining a close relationship with Russia’s military intelligence agency, the G.R.U. (Chuprygin, who denies links to Russian intelligence, told the F.T. that
    he advised Marsalek only on “shifting politics and tribal dynamics.”)

    At some point, Marsalek asked an Austrian intelligence officer named
    Egisto Ott to design a surveillance-proof room in the mansion. “It was a complete botch,” an independent security professional later testified.
    “The execution was extremely poor.” But Ott was useful in other ways.
    Under the direction of his former boss Martin Weiss—the onetime head of operations at Austria’s intelligence agency, the B.V.T.—he carried out
    regular background checks on Marsalek’s behalf, according to thousands of
    pages of leaked Austrian investigative files. Marsalek allegedly paid for searches on at least twenty-five people whom he suspected of having ties
    to intelligence agencies. Neither man still had access to the B.V.T.’s systems—Weiss had resigned his post, and Ott, who was suspected of selling state secrets to Russia, had been reassigned to work at Austria’s police academy. But they managed to run the searches regardless. (Weiss could not
    be reached for comment. Ott denied conducting background checks.)

    It is unclear what Marsalek was up to. He seemed to take every opportunity
    to play a part in political matters, no matter how strange or futile. At
    one point, he involved himself in an effort to relocate Austria’s Israeli Embassy to Jerusalem, to align with the policy of President Donald Trump. Marsalek’s name was found on a list of possible seed investors in a

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