WEBVTT - How to Spot a Fraud When Everyone's Against You 0:00:10.720 --> 0:00:14.000 Hello, and welcome to another episode of the All Thoughts Podcast. 0:00:14.080 --> 0:00:17.360 I'm Tracy Allaway and I'm Joe. Wisn't the Joe? What 0:00:17.440 --> 0:00:22.840 do you think the most famous apocryphal quote about markets is? 0:00:23.239 --> 0:00:25.360 I guess it would have to be the one about 0:00:25.480 --> 0:00:29.960 markets staying solvent rather or markets staying irrational longer than 0:00:30.400 --> 0:00:32.680 you could stay solvent, or something like that. Right, that's 0:00:32.680 --> 0:00:35.720 gotta be it. I'm so glad you said that one, 0:00:35.800 --> 0:00:39.080 because that was exactly what I had in mind. Uh, 0:00:39.520 --> 0:00:41.839 did no one really actually say like, does no one 0:00:41.880 --> 0:00:44.199 really know actually said that or what? I think? It 0:00:44.240 --> 0:00:47.520 gets attributed to Cain's but there's some debate about whether 0:00:47.600 --> 0:00:49.640 or not he actually said it. You'll also see different 0:00:49.720 --> 0:00:53.080 versions of it. So the market can remain irrational longer 0:00:53.120 --> 0:00:55.200 than you can remain solvent, or the market can stay 0:00:55.520 --> 0:00:59.920 irrational whatever. But it's a situation I think that everyone 0:01:00.200 --> 0:01:02.680 is kind of familiar with where you look at something 0:01:02.720 --> 0:01:08.080 and you go, this is absolutely insane, and yet you know, 0:01:08.280 --> 0:01:11.880 like it keeps rising in value or people keep pouring 0:01:11.920 --> 0:01:15.120 money into it, and you feel like you're going crazy 0:01:15.200 --> 0:01:17.800 because no one else seems to see the thing that 0:01:17.920 --> 0:01:21.680 you see. Yeah, you see this phenomenal. In a lot, 0:01:21.720 --> 0:01:26.119 someone either calls something right but their way before other people, 0:01:26.200 --> 0:01:28.679 they don't make money on it. They if they're short, 0:01:28.800 --> 0:01:32.440 they get stopped out of their trade long before the 0:01:33.120 --> 0:01:36.800 market sort of repriced to normal. Uh. And it seems 0:01:36.800 --> 0:01:39.440 really tough because you're like, you know, if you're if 0:01:39.440 --> 0:01:42.240 you're in the investment side, you're losing money or you're 0:01:42.280 --> 0:01:45.520 losing reputation or as you put it, you know, just 0:01:45.560 --> 0:01:49.320 like starts to feel like you're the one who's going crazy. Yeah, 0:01:49.440 --> 0:01:51.800 So today I am very very pleased to say that 0:01:51.840 --> 0:01:55.760 we are going to be diving into maybe the ultimate 0:01:55.880 --> 0:01:59.320 example of this phenomenon. But we're gonna be talking about 0:01:59.320 --> 0:02:01.960 wire Card. Do you remember that company? Yeah? But I 0:02:02.040 --> 0:02:05.160 never really understood what they did. And so for no 0:02:05.240 --> 0:02:09.239 other reason because I'm going to finally understand what wire 0:02:09.320 --> 0:02:12.359 Card did or didn't do maybe didn't do well. All 0:02:12.440 --> 0:02:14.120 you need to know is that it was supposed to 0:02:14.120 --> 0:02:17.400 be this this fancy fintech company. I think at some 0:02:17.480 --> 0:02:20.359 point it had like a market valuation of almost thirty 0:02:20.360 --> 0:02:23.200 billion dollars or something crazy like that, and it was 0:02:23.240 --> 0:02:27.200 this big, like up and coming rising star in Europe 0:02:27.280 --> 0:02:31.679 and particularly in Germany, and of course it turned out 0:02:31.760 --> 0:02:34.720 to be a massive fraud. And now, you know, speaking 0:02:34.760 --> 0:02:39.280 of going crazy, speaking of reputational damage. Uh, I'm gonna 0:02:39.320 --> 0:02:41.480 go ahead and say this episode comes with with a 0:02:41.520 --> 0:02:43.640 big disclaimer, which is there is going to be a 0:02:43.680 --> 0:02:49.079 lot of media navel gazing ahead, because Yeah, I think 0:02:49.080 --> 0:02:51.799 in this instance it works because we're gonna be talking 0:02:51.840 --> 0:02:56.840 to the journalists who actually covered wire Card and you know, 0:02:57.240 --> 0:03:01.520 doggedly investigated this company any and basically kept saying it's 0:03:01.560 --> 0:03:05.120 a fraud, there's evidence of fraud, and no one listened, 0:03:05.280 --> 0:03:08.800 almost no one listened. And meanwhile, it feels like all 0:03:08.880 --> 0:03:12.600 of finance, from the accountants to the cell side to 0:03:13.160 --> 0:03:19.400 the German regulators were really fighting against um the truth 0:03:19.440 --> 0:03:22.560 about this company actually coming out. It's so it's wild 0:03:22.720 --> 0:03:24.600 that like this it's even possible, Like do you think 0:03:24.600 --> 0:03:27.120 the question is like does the company have the business 0:03:27.120 --> 0:03:29.600 it claims to have? Does the company have the money 0:03:29.880 --> 0:03:33.160 it claims to have? And yet even these things we 0:03:33.240 --> 0:03:36.920 should be sort of like independently verifiably yes or no. 0:03:37.400 --> 0:03:39.160 It could take a long time for the truth to 0:03:39.200 --> 0:03:42.200 come out. Yeah, And I'm always personally interested in the 0:03:42.560 --> 0:03:45.960 sort of what do you call like the inflection points 0:03:45.960 --> 0:03:49.400 between everyone going Okay, this is fine, and then suddenly 0:03:49.440 --> 0:03:52.480 everyone going, oh, actually there's billions of dollars or billions 0:03:52.480 --> 0:03:55.120 of euros missing from this company. It's not so fine. 0:03:55.520 --> 0:03:58.080 So alright, without further ado, I am very pleased to 0:03:58.080 --> 0:04:01.120 say we're going to be speaking with Dan McCrum. He's 0:04:01.240 --> 0:04:05.400 an investigations correspondent at the Financial Times and also the 0:04:05.480 --> 0:04:08.760 author of a new book all about wire Card. It's 0:04:08.800 --> 0:04:11.680 called money Men, A hot start up, a billion dollar fraud, 0:04:11.760 --> 0:04:13.920 A fight for the truth. And we're also going to 0:04:13.960 --> 0:04:16.440 be speaking with Paul Murphy. He is the f t 0:04:16.680 --> 0:04:20.640 S head of Investigations, also my former boss at ft 0:04:20.720 --> 0:04:25.880 Alphaville and veteran at at Lunching the right way, I 0:04:26.120 --> 0:04:28.680 would put it that way. All right, Dan and Paul, 0:04:28.720 --> 0:04:31.360 thank you so much for coming on our thoughts. Thanks 0:04:31.400 --> 0:04:36.159 for having us. So maybe just to begin with, shall 0:04:36.240 --> 0:04:39.800 we let's let's start at the beginning. So what exactly 0:04:39.920 --> 0:04:44.000 piqued your interest in wire Card down. So this was 0:04:44.400 --> 0:04:47.280 eight years ago and I was having a conversation with 0:04:47.680 --> 0:04:50.600 quite a well known Australian heads fund manager, John Hampton, 0:04:51.400 --> 0:04:53.880 and he just said to me, hey, Dan, would you 0:04:53.920 --> 0:04:59.000 be interested in some German gangsters, and that was the start. 0:04:59.040 --> 0:05:01.680 I just down the name, this funny little company called 0:05:01.680 --> 0:05:05.880 wire Card, and the best description of it then was 0:05:05.920 --> 0:05:09.000 sort of a European paper. It did something to do 0:05:09.080 --> 0:05:12.040 with payments, and it was worth about four billion dollars, 0:05:12.200 --> 0:05:14.120 And yeah, I didn't think much more of it then. 0:05:14.160 --> 0:05:16.160 I mean I looked at its business. It didn't really 0:05:16.160 --> 0:05:18.919 make much sense to me. And then this other short seller, 0:05:18.960 --> 0:05:22.560 a guy called Leo Perry, got in touch and we 0:05:22.600 --> 0:05:24.640 went and met for coffee, and he laid out in 0:05:24.680 --> 0:05:28.080 front of me these sort of really close written sheets 0:05:28.839 --> 0:05:32.919 of this theory that hang on a second, this wire 0:05:32.920 --> 0:05:37.000 Card is a big accounting fraud. So what was the well, 0:05:37.080 --> 0:05:39.760 what was the ostensible business before we get to sort 0:05:39.800 --> 0:05:42.640 of the gap between what was going on in what uh, 0:05:43.320 --> 0:05:46.520 what actually was going on? What was the ostensible business, 0:05:46.600 --> 0:05:48.919 what did they claim to be doing, what was the product? 0:05:49.000 --> 0:05:52.000 And did it have people actually using the surface. So 0:05:52.000 --> 0:05:54.880 it had this real business and it's a pretty simple business. 0:05:55.640 --> 0:05:58.919 It processes credit and debtor car payments. So as you 0:05:58.960 --> 0:06:03.039 have like an online shop selling flip flops, then it 0:06:03.040 --> 0:06:05.080 would help you get money from customers who wanted to 0:06:05.080 --> 0:06:08.280 buy your flip flops. It's as simple as that. Lots 0:06:08.320 --> 0:06:11.440 of businesses do this. But the thing about WORKUD was 0:06:11.560 --> 0:06:14.320 it was growing way faster than everyone else and it 0:06:14.360 --> 0:06:21.560 was also really profitable, quite unusually profitable. And that's the key, right, 0:06:22.080 --> 0:06:25.400 You can't normally do both of those things. So one 0:06:25.400 --> 0:06:27.599 of the things that you wrote about very early on 0:06:27.880 --> 0:06:30.600 was wire cards, I mean basically a roll up strategy 0:06:30.760 --> 0:06:34.760 wherewith they would buy all these smaller payment processors in 0:06:35.040 --> 0:06:38.080 far flung places, and they would buy them in kind 0:06:38.120 --> 0:06:40.360 of a weird way. Could you talk about that a 0:06:40.360 --> 0:06:43.480 little bit, yes, So what worker had done was it 0:06:43.600 --> 0:06:47.560 spent about five years buying up these little businesses all 0:06:47.600 --> 0:06:50.040 over Asia, you know, sort of a few tens of 0:06:50.120 --> 0:06:53.600 million here, a few tens of million there, and it 0:06:53.720 --> 0:06:56.039 said this was part of its big growth strategy, and 0:06:56.080 --> 0:06:58.680 every time it bought it, it was this big acceleration 0:06:58.720 --> 0:07:01.720 in the business. But what happens when I went and 0:07:01.760 --> 0:07:05.720 looked at those businesses is actually bought. You could see 0:07:05.760 --> 0:07:10.520 in sort of local filings or local press releases that 0:07:11.440 --> 0:07:15.680 the numbers didn't match what work I was claiming for them. 0:07:15.720 --> 0:07:17.120 And then you had a closer look and you like, 0:07:17.160 --> 0:07:20.200 actually these businesses and really bad shape. You know, the 0:07:20.200 --> 0:07:23.240 audisers would say this, you know, there's a risk this 0:07:23.280 --> 0:07:26.000 isn't a going concern. And what it added up to 0:07:26.240 --> 0:07:30.400 was there was this mismatch between what the company was 0:07:30.440 --> 0:07:33.800 claiming and what it was doing on the ground. And 0:07:33.880 --> 0:07:36.960 you could see little transactions, you know, which seemed like 0:07:37.080 --> 0:07:40.760 money was maybe going out the side door, and it 0:07:40.800 --> 0:07:43.040 looked to me like there was accounting fraws. They were 0:07:43.080 --> 0:07:49.000 just using these these acquisitions to play some tricks with 0:07:49.120 --> 0:07:52.480 the accounting as they bought them. You know. It's funny 0:07:52.600 --> 0:07:55.520 going back to you mentioned that the original catalyst for 0:07:55.560 --> 0:07:58.480 this was a conversation with John Hampton, and we had 0:07:58.600 --> 0:08:02.520 John on the podcast I think maybe last October, maybe 0:08:02.560 --> 0:08:04.840 it was actually in the middle of last summer, and 0:08:04.880 --> 0:08:07.240 I remember he made a point that was like, any 0:08:07.240 --> 0:08:11.640 time you see a financial firm growing fast period, that's 0:08:11.680 --> 0:08:13.800 like a good red flag to begin with it, Like 0:08:14.000 --> 0:08:17.880 finance is kind of boring, and so if you see 0:08:17.920 --> 0:08:20.640 any sort of company in finance making a lot of progress. 0:08:20.680 --> 0:08:22.880 And of course what was that other company, green Cell 0:08:23.120 --> 0:08:25.600 was the other one that he was h I think 0:08:25.640 --> 0:08:27.560 that was actually what we're talking about on the podcast, 0:08:27.560 --> 0:08:30.240 and of course that also it was a fast growing 0:08:30.440 --> 0:08:34.680 finance company that that imploded. What did it look like though? 0:08:34.720 --> 0:08:37.679 You know, when you say okay, there seemed to be 0:08:37.760 --> 0:08:41.800 some gap between numbers here and numbers, They're like, can 0:08:41.840 --> 0:08:45.680 you give give a little bit more detail onto what 0:08:45.800 --> 0:08:49.280 these discrepancies looked like from your perspective? So why I 0:08:49.280 --> 0:08:51.600 would do funny things like it would say, hey, we're 0:08:51.640 --> 0:08:56.880 buying this company in December, and it would actually announce 0:08:56.960 --> 0:08:59.320 the deal and agree it then, and then it would 0:08:59.360 --> 0:09:02.280 make a big down payment, so we would say, hey, 0:09:02.320 --> 0:09:05.920 we haven't actually signed the documents to take ownership of 0:09:05.960 --> 0:09:09.800 the assets yet, but so because we're you know, we're 0:09:09.800 --> 0:09:12.080 heading towards as takeover, will make a kind of a 0:09:12.080 --> 0:09:15.240 deposit like a down payment, and they were claim to 0:09:15.280 --> 0:09:18.600 send a bunch of cash out the door, so say 0:09:18.840 --> 0:09:21.920 ten million euros out of a forty million euro deal, 0:09:22.440 --> 0:09:25.360 which I would send out before the year end finished. 0:09:25.840 --> 0:09:29.440 And what that looked like to me was the thing 0:09:29.440 --> 0:09:34.839 about accounting fraud is your profit looks great, but when 0:09:34.880 --> 0:09:37.880 the auditors walk in at the start of the year 0:09:37.960 --> 0:09:41.319 to do the ordit, the first thing they're going to 0:09:41.400 --> 0:09:44.800 say is can we see the bank balances and they're 0:09:44.800 --> 0:09:46.640 going to be expect them to be full of cash 0:09:46.640 --> 0:09:49.400 because you've just had this really profitable year. So what 0:09:49.480 --> 0:09:51.720 it looked like was this trick to go, well, the 0:09:51.760 --> 0:09:54.160 cash is going to be short, will pretend we've sent 0:09:54.200 --> 0:09:57.520 it out to these guys, and that will hide the fraud. 0:09:58.040 --> 0:09:59.960 And so every year the deal has got bigger, because 0:10:00.240 --> 0:10:02.679 when you're do an accounting fraud, the numbers get bigger 0:10:02.679 --> 0:10:05.880 every year. And one of them, you know, and the 0:10:05.920 --> 0:10:08.120 mechanics of that were quite quite complex. But one of 0:10:08.160 --> 0:10:11.960 the things you can look at with these companies is, yeah, 0:10:12.400 --> 0:10:15.120 if they're growing really fast, maybe it's too good to 0:10:15.120 --> 0:10:18.560 be true. And the funny thing about wire Card was 0:10:18.679 --> 0:10:21.760 it was growing really fast and claimed to be really profitable, 0:10:22.200 --> 0:10:25.960 but it kept raising money, kept going to shareholders, aren't 0:10:26.000 --> 0:10:29.120 asking for them to inject some cash, or you know, 0:10:29.280 --> 0:10:31.480 kept going to the banks and asking for more debt. 0:10:32.160 --> 0:10:35.320 And that was a big red flag. Paul, Maybe this 0:10:35.480 --> 0:10:38.439 is a good place to bring you in. But how 0:10:38.520 --> 0:10:41.760 how did the rest of the world perceive wire Card 0:10:42.320 --> 0:10:46.760 at that time, to be frank we didn't know much 0:10:46.800 --> 0:10:50.440 about it at all. The kind of you know, it 0:10:50.559 --> 0:10:53.959 was an unlikely subject that Dad had picked up. I 0:10:54.040 --> 0:10:57.840 knew from my own experience that it's very difficult to 0:10:57.840 --> 0:11:01.160 tell a story like this of accounty fraud, of balance 0:11:01.200 --> 0:11:05.559 sheet manipulation, and so I was intrigued by it because 0:11:05.559 --> 0:11:07.560 I knew he was on a kind of quite a 0:11:07.600 --> 0:11:14.240 tough assignment. But you know, it's it. I'm sometimes asked that, 0:11:14.400 --> 0:11:17.880 you know, how do we choose a subject to investigate 0:11:18.000 --> 0:11:21.720 to throw kind of resources at the fact of the 0:11:21.760 --> 0:11:25.680 matter is is that often, you know, the targets of 0:11:25.720 --> 0:11:30.079 our kind of investigative work just present themselves to us. 0:11:30.880 --> 0:11:35.559 And this was one of those. Because you know, Dan 0:11:35.679 --> 0:11:38.320 started writing about it and that the reaction of the 0:11:38.400 --> 0:11:42.600 company was odd, to say the least. You know, it 0:11:42.679 --> 0:11:45.679 was out of kilter. And that's simply you know, I 0:11:45.720 --> 0:11:49.520 could see it pete Dan's interest and he was going 0:11:49.600 --> 0:11:53.280 deeper and deeper into this subject. But it also piqued 0:11:53.320 --> 0:11:56.400 my interest as well. So this is one of the 0:11:56.880 --> 0:12:01.520 crazier things about this entire story, which the reaction um 0:12:01.600 --> 0:12:05.200 that Dad got as he was writing these things, and 0:12:05.320 --> 0:12:08.480 suddenly it seemed like, I don't even know how to 0:12:08.520 --> 0:12:10.600 describe it, but I know, you had people attacking you 0:12:10.640 --> 0:12:14.559 on Twitter, you had the regulators in Germany who eventually 0:12:14.600 --> 0:12:18.640 started a criminal investigation into you the reporters at the 0:12:18.720 --> 0:12:22.839 Ft for writing negative things against wire Card, and then 0:12:22.840 --> 0:12:25.480 you also had at one point people that seemed to 0:12:25.520 --> 0:12:29.360 be spying on the Ft. So could you talk a 0:12:29.360 --> 0:12:32.920 little bit more about that reaction because it seems surreal, 0:12:33.040 --> 0:12:35.640 and reading the book, it actually does read like a 0:12:35.679 --> 0:12:39.760 spy thriller in some respects because of the massive reaction 0:12:39.800 --> 0:12:43.280 you got. Yeah, it was this kind of slow but 0:12:43.400 --> 0:12:46.959 steady escalation of weirdness, like it almost had like a 0:12:47.040 --> 0:12:49.880 cat and mouse quality where we would try and write 0:12:49.880 --> 0:12:52.040 one thing about them, and then the reaction would be weird, 0:12:52.760 --> 0:12:54.840 and the longer we went on, the weirder it got. 0:12:55.320 --> 0:13:00.400 So it started with angry, angry legal letters, fairly standard approach. 0:13:01.080 --> 0:13:03.440 But one of the first times I sent work questions, 0:13:03.440 --> 0:13:06.240 they came back and around, hang on a second, are 0:13:06.240 --> 0:13:09.959 you in league with short sellers? Like either corruptly or 0:13:10.000 --> 0:13:12.480 you know, am I just naively being used by them 0:13:12.559 --> 0:13:16.360 to attack this company? It's like, that's weird. We've fit 0:13:16.400 --> 0:13:19.280 a nerve here, haven't we. And then we all started 0:13:19.280 --> 0:13:22.760 getting these phishing emails from hackers who were very persistently 0:13:23.280 --> 0:13:26.600 trying to get us to give away our passwords, and 0:13:26.679 --> 0:13:29.400 not just a bunch of journalists at the FT, but 0:13:29.480 --> 0:13:32.320 you know, other people who could be identified as critics 0:13:32.360 --> 0:13:37.360 of wyre Card elsewhere. And then we realized private detectives 0:13:37.360 --> 0:13:41.520 were involved. And then well and then this ampster. You didn't, Paul, 0:13:41.559 --> 0:13:48.880 you got offered ten million dollars? Were you tempted? Paul? Well? Actually, 0:13:49.240 --> 0:13:53.480 I mean I was so surprised by the approach. I 0:13:53.520 --> 0:13:56.960 wandered back into the FT news room and the news 0:13:57.080 --> 0:13:59.880 editor at that time as Peter Spiegel, who's who's now 0:14:00.040 --> 0:14:03.080 in New York, and I said, you know, this has 0:14:03.120 --> 0:14:05.439 just happened. Peter, what do you think? How should we react? 0:14:05.480 --> 0:14:07.840 And he said, I want some You just assumed it 0:14:07.880 --> 0:14:11.000 was a setup. We already knew this was a very 0:14:11.160 --> 0:14:14.600 very strange company. You know, aside from all the kind 0:14:14.600 --> 0:14:17.800 of you know, the phishing emails, the kind of the 0:14:17.920 --> 0:14:22.280 kind of clown spying operation, we were also dealing with 0:14:22.840 --> 0:14:27.040 an avalanche of online abuse. You know, Dan was taking 0:14:27.240 --> 0:14:30.000 you know, was taking the front of it, but it 0:14:30.080 --> 0:14:34.760 was also any other journalists, other journalists on Alphabel, myself, 0:14:35.720 --> 0:14:39.920 the editor of course, everybody was accusing us of as 0:14:39.920 --> 0:14:43.880 of being corrupt in some way, which in itself was 0:14:44.000 --> 0:14:48.440 just kind of crazy. You know that it was you know, 0:14:48.520 --> 0:14:50.400 this was you know, the time, this was kind of 0:14:50.520 --> 0:14:54.200 pre Trump. It wasn't as though they were, you know, 0:14:54.320 --> 0:14:58.800 just copying what was happening in America. It was this 0:14:58.920 --> 0:15:02.400 was this we gradually came to understand this was the 0:15:02.840 --> 0:15:24.480 wild called playbook. Let's go back to the very beginning, Dan, 0:15:24.560 --> 0:15:28.680 because you mentioned that in your first conversation, and also 0:15:28.680 --> 0:15:31.960 I want to talk to about working getting tips from 0:15:31.960 --> 0:15:34.640 short sellers and allegations of being in league with them. 0:15:34.680 --> 0:15:37.240 But before we get to that, you know, you mentioned 0:15:37.240 --> 0:15:40.080 that the first thing that John Hempton said is like 0:15:40.480 --> 0:15:42.920 something about gangsters. And we so we every wady we 0:15:43.000 --> 0:15:45.560 talked about the accounting fraud. But who were the people 0:15:45.640 --> 0:15:48.080 when he said, are you interested in gangsters? Here's this 0:15:48.120 --> 0:15:51.240 German company. What are we actually talking about? And what 0:15:51.280 --> 0:15:54.320 did he see in terms of the people that were 0:15:54.720 --> 0:15:58.040 involved with this payments company? So there were two theories. 0:15:58.120 --> 0:16:01.360 Like John looked at it and said, yeah, this looks 0:16:01.360 --> 0:16:04.360 like in accounting fraud. There's also this other side to work, 0:16:04.560 --> 0:16:09.960 because if you're processing international payments, well then there's an 0:16:10.000 --> 0:16:11.960 awful lot of interesting things you could do with that 0:16:12.400 --> 0:16:16.479 if you're not worried about the laws. So the suspicion 0:16:16.640 --> 0:16:20.320 was that wire Card was basically processing payments for every 0:16:20.400 --> 0:16:23.560 kind of nasty thing online that you might care to imagine. 0:16:24.800 --> 0:16:29.120 And those two theories sort of we're going on for 0:16:29.240 --> 0:16:32.400 quite a long time. And in terms of the gangsters, 0:16:32.560 --> 0:16:35.320 I mean, I think he might have had in mind 0:16:36.160 --> 0:16:38.520 the chief executive Marcus Brown, who is this sort of 0:16:38.600 --> 0:16:42.120 his former KPMG management consultants who just sort of spoken 0:16:42.160 --> 0:16:45.440 tech goobty book. But what we started to learn, as 0:16:45.560 --> 0:16:47.920 you know, the more we got into it, that the 0:16:48.000 --> 0:16:52.200 real weird sort of gangster slashed by behind it was 0:16:52.240 --> 0:16:56.800 this bizarre character Yan Marcella. He's kind of like an 0:16:56.840 --> 0:17:00.520 Austrian whiz kids, like, speaks multiple languages, dropped out of 0:17:00.600 --> 0:17:04.880 high school to run a tech startup, and everyone goes 0:17:04.920 --> 0:17:08.879 on about how elaquent and charming. I mean, you had 0:17:08.960 --> 0:17:13.760 lunch with him, right, I mean, And and he's this 0:17:13.800 --> 0:17:16.560 sort of charismatic guy who was the heart of you know, 0:17:16.720 --> 0:17:20.600 everything work I was doing, But there's this weird other 0:17:20.640 --> 0:17:24.960 side to him, and he comes across as someone who's 0:17:25.000 --> 0:17:29.080 like the consummate improviser. He's constantly getting into these scrapes 0:17:29.119 --> 0:17:32.800 and almost destroying the company. But then he's got this 0:17:32.880 --> 0:17:35.800 other side to him where even now we're not really 0:17:35.840 --> 0:17:39.840 sure whether was he a spy or did he have 0:17:40.000 --> 0:17:42.600 just some sort of James Bond fixation where he's you know, 0:17:43.240 --> 0:17:46.159 trying to hang out with Libyan militia groups or you know, 0:17:46.600 --> 0:17:48.800 for his holidays, he likes to go for a stroll 0:17:48.840 --> 0:17:53.760 around Syria with the Russian Army, as one does, right, Paul, 0:17:53.800 --> 0:17:58.800 what was lunch like with him? Well, Um, the first 0:17:58.880 --> 0:18:01.480 lunch I had was a kind of stilted affair. This 0:18:01.560 --> 0:18:04.119 was the one where we thought there was a chance 0:18:04.160 --> 0:18:08.800 that he'd offer me a bribe, and there are other 0:18:08.880 --> 0:18:10.960 people around the lunch table, and it was it was 0:18:11.000 --> 0:18:13.840 just a very kind of stiff affair because he was 0:18:14.880 --> 0:18:19.959 obviously anxious about meeting me. You know, we were discussing, 0:18:20.520 --> 0:18:24.080 you know the fact that I knew that his company 0:18:24.160 --> 0:18:27.080 was running a kind of black operation against the ft 0:18:28.160 --> 0:18:34.000 because he didn't offer a bribe at that On that occasion, 0:18:34.800 --> 0:18:38.640 we organized a second lunch together which was just myself 0:18:38.640 --> 0:18:43.000 and Master Lick, And if I'm prank, he was actually 0:18:43.080 --> 0:18:48.719 it was a kind of fascinating conversation, mainly discussing telegram 0:18:48.920 --> 0:18:51.720 the messaging gap, which at the time was planning a 0:18:51.840 --> 0:18:55.680 huge token offering. I mean, the guy was interesting. Can 0:18:55.720 --> 0:18:58.320 I ask a sort of big question and it maybe 0:18:58.320 --> 0:19:00.200 a little more I don't know if it's philosophical goal 0:19:00.400 --> 0:19:04.440 or just sort of but like, what's the deal with Germany? 0:19:04.480 --> 0:19:08.160 They opened it a criminal investigation into people reporting um 0:19:08.440 --> 0:19:10.800 on you. But also like there are all these other 0:19:10.840 --> 0:19:12.720 things that go on with Germany, Like there was the 0:19:12.880 --> 0:19:16.840 car company with the big diesel scandal, and they're always 0:19:16.840 --> 0:19:19.600 having these trouble with the banks that seemed to lose 0:19:19.640 --> 0:19:22.160 a lot of money all that time. Like is there 0:19:22.440 --> 0:19:25.120 what's the Is there some issue with like German corporate 0:19:25.119 --> 0:19:29.080 culture or the sort of connection between regulators in Germany 0:19:29.160 --> 0:19:32.439 and companies such that there isn't checks and balances or 0:19:32.520 --> 0:19:35.960 aren't auditing sort of domestic auditing, Like why does this 0:19:36.160 --> 0:19:39.120 why do these big scandals seem to recur there? Well, 0:19:39.119 --> 0:19:41.960 you do have the old scandal in the US. Joe, Yeah, 0:19:41.960 --> 0:19:44.440 that's true. We've we've we we we've had a few 0:19:44.440 --> 0:19:48.840 I guess yeah, no, Joe, it is something that fascinated us. Okay, 0:19:48.920 --> 0:19:53.480 so you know, we couldn't. I personally could not understand 0:19:53.640 --> 0:19:59.600 why the German elite, the German establishment collectively decided that 0:20:00.400 --> 0:20:05.520 my colleague Dan McCrumb was was corrupt, that we were 0:20:05.600 --> 0:20:07.560 just kind of we would the f team was just 0:20:07.600 --> 0:20:11.080 allowing Dan to kind of roll out these kind of 0:20:11.960 --> 0:20:16.879 you know, defamatory, kind of destructive articles about wire Card. 0:20:17.080 --> 0:20:20.119 Why did they believe that? I think it's fair to 0:20:20.240 --> 0:20:24.320 you know, it's obviously were generalizing here about German business 0:20:24.320 --> 0:20:29.120 and political and financial society. But there has been over 0:20:29.160 --> 0:20:32.359 the years a kind of you know, a tendency for 0:20:32.440 --> 0:20:36.120 them to distrust what we would call kind of Anglo 0:20:36.160 --> 0:20:40.639 Saxon capitalism. You know, there was the kind of hedge 0:20:40.640 --> 0:20:45.000 funds and locusts, all those sort of examples. Also it 0:20:45.080 --> 0:20:48.760 was the German bank that loaded up on all the garbage, 0:20:48.920 --> 0:20:53.000 like prior to the Great Financials too, like the greensil 0:20:53.080 --> 0:20:55.840 didn't they have opened up their own bank in Germany. 0:20:55.880 --> 0:20:58.000 Like it feels like, you know, I always have this 0:20:58.080 --> 0:21:01.880 sort of view of Germany is like this sort of uh, 0:21:02.080 --> 0:21:06.520 small c conservative culture, and yet it seems like they're 0:21:06.640 --> 0:21:08.880 they're always like running into trouble, particularly when it comes 0:21:08.880 --> 0:21:12.119 to finding it well. I think there's an interesting point 0:21:12.160 --> 0:21:17.679 here about how frauds does exploit trust. So Germany is 0:21:17.720 --> 0:21:22.000 this very high functioning economy where most people aren't psychopaths, 0:21:22.960 --> 0:21:25.639 and you get a lot done that way, and it's 0:21:25.720 --> 0:21:28.120 very efficient if you go about your life and your 0:21:28.160 --> 0:21:30.760 business assuming the person on the other side of the 0:21:30.800 --> 0:21:33.879 table isn't trying to rip you off. And that's a 0:21:33.880 --> 0:21:35.800 good thing. That saves us all a lot of time 0:21:35.840 --> 0:21:39.479 and effort checking things that we don't have to. And 0:21:39.520 --> 0:21:42.919 so there's an argument here that what work and what 0:21:42.960 --> 0:21:46.680 these big, complex frauds exploit is that element of trust 0:21:46.800 --> 0:21:51.280 because people literally don't see it coming because it is 0:21:51.320 --> 0:21:55.800 so unusual. Now, that doesn't explain everything, because once you 0:21:55.840 --> 0:21:59.840 start to go, hey, there's some serious evidence here, you know, 0:22:00.000 --> 0:22:02.240 look at this we you know, we're printing documents that 0:22:02.240 --> 0:22:05.760 show there's a fraud, and people are still going, yeah, 0:22:05.800 --> 0:22:09.120 I think it'll be fine, or I think the ft 0:22:09.280 --> 0:22:11.560 is corrupt. That's still weird, and you need a bit 0:22:11.560 --> 0:22:14.359 more of an explanation for it. The thing that amazed 0:22:14.400 --> 0:22:18.439 me at the time was also the German press really 0:22:18.520 --> 0:22:23.480 seemed to automatically sort of arrange themselves against the FT, 0:22:23.760 --> 0:22:26.960 and even I remember one of our former colleagues at 0:22:26.960 --> 0:22:29.600 the FT who was then working at the handles Blat 0:22:29.720 --> 0:22:34.080 was they published an article I can't remember what with 0:22:34.160 --> 0:22:37.400 the exact headline was, but there was a picture of 0:22:37.480 --> 0:22:41.000 like a credit card, and the caption underneath the credit 0:22:41.000 --> 0:22:44.120 card was like, I'm an FT journalist, can I pay 0:22:44.160 --> 0:22:47.600 for that bribe with credit card? Like basically insinuating, not 0:22:47.680 --> 0:22:51.040 even insinuating, just stating out right that the FT was 0:22:51.080 --> 0:22:55.400 accepting bribes in exchange for coverage, which it's just as 0:22:55.960 --> 0:22:59.000 you know, as journalists and former colleagues, that just seems 0:22:59.040 --> 0:23:04.280 such a weird position to automatically take yes, and we 0:23:04.280 --> 0:23:07.679 were quite shocked. There was also the example of the 0:23:07.720 --> 0:23:11.640 commerce bank analyst putting out a note, you know, an 0:23:11.680 --> 0:23:15.639 actual you know, research note, saying, oh, Dan's just you know, 0:23:16.000 --> 0:23:19.440 Dan's corrupt. We've known that for years, ignored when he's writing, 0:23:20.200 --> 0:23:25.760 I mean, you know that. As a young journalist before 0:23:25.840 --> 0:23:32.000 the Internet, I used to go to UM international press conferences, 0:23:32.080 --> 0:23:35.360 some of which were held in Germany, and one thing 0:23:35.359 --> 0:23:37.960 I remember is on the first occasion I went to 0:23:38.040 --> 0:23:41.400 one was that the chief executive would do a presentation 0:23:42.320 --> 0:23:48.440 and the assembled German press would all applaud the chief executive, 0:23:49.160 --> 0:23:51.560 and all the kind of British press would be standing 0:23:51.600 --> 0:23:53.239 there kind of shaking their head saying what the hell 0:23:53.320 --> 0:23:56.000 is going on here? You know, were journalists as you know, 0:23:56.160 --> 0:23:58.720 we're here to kick the tires, not to applaud the 0:23:58.800 --> 0:24:02.880