Why so many questions remain unanswered in Germany's largest financial scandal

The massive fraud trial against Germany's disgraced fintech giant Wirecard opened in Munich on Thursday, two and a half years after the company's collapse. Ex-CEO Markus Brown and two former executives face a series of charges, including falsifying the group's balance sheets and cheating lenders out of $3.1 billion (€3.3 billion).

An 89-page indictment is to be read out throughout the trial being held in an underground high-security wing next to Stadelheim Prison, the largest prison in Bavaria. Braun was "The Godfather" of an elaborate scheme to defraud investors in the fintech star Wirecard, a former German lawmaker told DW ahead of the opening of the trial.

Fabio De Masi, a former lawmaker for Germany's socialist Left Party who sat on a parliamentary inquiry into the Wirecard affair, said "Mr. Braun was not a victim but The Godfather of the criminal operation."

De Masi recalled parliament's 675-page report on Wirecard, published last year, that established that Braun was involved in signing off on funds to third-party firms despite warnings that he was giving away "the last liquidity of Wirecard."

What was Wirecard?
Wirecard was once the poster child for Germany's financial technology sector. The firm began life in 1999 as an online payment processor for porn and gambling websites and grew a stable stream of revenue that helped it survive the dot-com bust. The company built up a wider base of retail clients thanks to the global boom in online shopping and, later, mobile payments.

Under CEO Markus Braun, a former KMPG consultant who joined in 2002, the company grew at breakneck speed, swallowing up smaller payment firms and expanding into banking. It even launched a joint venture with China's e-commerce giant Alipay to allow Chinese tourists to pay for goods and services while abroad.

Wirecard was listed on the Frankfurt Stock Exchange in 2005 and 13 years later, it knocked traditional lender Commerzbank out of the blue-chip DAX index. At its peak, the company was valued at more than €24 billion ($25 billion), outweighing even Deutsche Bank.

What brought down Wirecard?
In 2016, US financial investigative research firm Zatarra issued a negative report on Wirecard, alleging fraudulent activity at the firm. It accused senior executives of committing money laundering and defrauding Visa and Mastercard.

Three years later, Financial Times journalist Dan McCrum picked up on the scandal, alleging accounting irregularities at Wirecard's Asian units in a series of articles.

By June 2020, the company admitted to auditor EY that €1.9 billion in cash meant to be held in two Philippine accounts likely didn't exist. Wirecard's share price plummeted by 99% and it became the first DAX company to file for insolvency, owing creditors nearly €4 billion.

An FT investigation found that third-party acquirers (TPAs) — businesses that processed payments for Wirecard where it lacked its own license to operate — accounted for around half of Wirecard's reported revenues and a large chunk of its profits. But an address for one such firm led to a family home in the Philippines. Another was a Manila bus company.

Wirecard's auditor EY, who signed off on the firm's accounts for a decade, also faced sharp criticism and is now being sued by Wirecard shareholders. EY has said it acted professionally.

The government of then Chancellor Angela Merkel briefly considered bailing out the company and her then Finance Minister, now Chancellor, Olaf Scholz was censured for bungling oversight of the company. Scholz told a parliamentary inquiry that most of the fraud happened before his tenure.

The scandal also revealed that Germany's market regulator BaFin had not only failed to spot the fraud — despite the suspicions raised by investigative journalists and financial market analysts — it had instead filed criminal complaints against two FT journalists, claiming market manipulation, which were later dropped.

De Masi told DW that the official reaction to the negative media reports was "scandalous," as the public prosecutor initiated a short-selling ban on Wirecard shares "based on a wild conspiracy theory that Bloomberg conspired to blackmail Wirecard."

The embarrassment forced the resignation of BaFin's chief and the head of Germany's accounting watchdog and even spawned a Netflix documentary, recounted by McCrum.