"Gushing fountain of fraud in crypto and DeFi” says journalist whose reporting led to collapse of Wirecard
FT journalist Dan McCrum was speaking today (Wednesday) at AltFi’s Festival of Finance conference with AltFi managing editor Oliver Smith, detailing the demise of Wirecar
"There is a gushing fountain of fraud in crypto and DeFi (decentralized finance), according to the journalist whose reporting helped bring down German fintech Wirecard.
McCrum gave an account of how the paper’s reporting helped topple the tech unicorn and what the multi-million fraud means for the future of Europe’s fintech sector.
Wirecard collapsed in June 2020 after admitting that €1.9bn (£1.7bn) was missing from its accounts.
Wirecard's former CEO Markus Braun, and two other former senior executives, have been charged with suspected market manipulation and false representation of the company’s financial accounts.
McCrum told the conference audience to be suspicious of investing in crypto and decentralised finance.
Asked what advice he would give investors to spot a fraudulent firm, McCrum said: “There is a simple thing that Warren Buffet has always said, which [is] he doesn’t invest in a business that he doesn’t understand” which is simple but effective advice, he said.
“And the thing about Wirecard was I could not understand this business”, he said, adding that even when he had worked it was operating fraudulently, it was hard to convince others.
McCrum said potential investors in fintech should always ask about the fintech they want to invest in ‘how do you make your money? What is the economic basis for this?’ And that will get you quite a long way.
He added: “There’s this gushing fountain of fraud in crypto and DeFi which are all Ponzi schemes in plain sight.
“There is a bunch of those which you can just rule out straight away”.
McCrum, who has written a book called Money Men detailing the Wirecard controversy, told a gripping tale of the demise of Wirecard, involving unscrupulous businessmen, private detectives and sleeping with a golf club under his bed for protection.
Questioned about who he blamed over the fraud, the journalist said “there is a lot of blame to go around” pointing the blame at Wirecard’s auditor EY, the regulator and also investors who had “questions to answer”.
McCrum said he was “dumbfounded” when he heard that Softbank was investing $1bn in the German payments company in 2019, despite the FT reporting alleged accounting malpractice at the
“So when SoftBank announced it was doing this deal, I was dumbfounded.”
His editor walked into the office and said 'Dan you do realise Softbank has just bet a billionaire dollars that you’re wrong'.