Unfortunately, if you have an ethics blog you never run out of subjects to write about. Business scandals are especially plentiful. We’ve addressed, among others, the scandals at Boeing, Volkswagen, Ozy Media, McKinsey, WeWork, Robinhood, and Theranos. We haven’t yet addressed in any detail Sam Bankman-Fried and the FX scandal, Charlie Javice’s Frank fraud, Ruja Ignatova and OneCoin (the second largest Ponzi scheme in history), The HeadSpin fraud, the Slync fraud, the Outcome Health fraud, and on and on. For the ethics blogger, it’s an embarrassment of riches if riches these embarrassments be. We may blog about these other scandals eventually, but today our focus is on one of Germany’s biggest moral debacles this century—the Wirecard fraud.

Wirecard was formed around 2000 and evolved into Germany’s fastest-growing fintech company–Germany’s answer to PayPal. Its apparent success was locally celebrated in part because Germany, which is a leader in manufacturing, has been a relative laggard in the high-tech arena. Wirecard’s initial growth was fueled by handling payments for online pornography sellers. When legal changes put a dent in that business, it focused on servicing online gambling operations. To fool MasterCard and Visa, Wirecard would intentionally miscode illegal gambling transactions as legal transactions, mostly getting away with it.  Along the way, it provided money laundering services for many shady characters (likely including Russian oligarchs).

When growth stalled, Wirecard’s CEO Markus Braun and COO Jan Marsalek began to focus on pumping up the company’s stock price by reporting fake income. This succeeded wildly but also created a problem for Braun and Marsalek. If there was so much income, where was the money? Even the extraordinarily disengaged auditors at Ernst & Young might begin to wonder at some point. To account for the missing money, Wirecard began acquiring companies, mostly in Asia, most of which were not real firms. They did not exist except on paper and the money that Wirecard supposedly spent to buy them did not exist either.

While Wirecard’s auditors at EY remained oblivious to the huge fraud that was going on right in front of their eyes, short sellers and a few journalists began investigating. Red flags started appearing as early as 2007. Wirecard’s response was heavy-handed. It sent gangster types to threaten and rough up short sellers. One was knocked unconscious on the streets of New York City. It similarly threatened journalists, particularly the Financial Times’ Dan McCrum. Wirecard hired private investigators, seeking to prove that short sellers were paying journalists to make up lies about Wirecard. There was no such evidence, as Wirecard probably knew. However, Wirecard continually repeated that theme, convincing many investors that it was being set up. In August of 2018, Wirecard’s shares were selling at nearly €200, giving the firm a market cap of €28 billion. And this after McCrum and the Financial Times had published the first major exposé.

When McCrum published another major piece on January 30, 2019, alleging that Wirecard had forged contracts and falsified accounts, Wirecard again claimed that McCrum was being paid by short sellers. Rather than investigating the evidence McCrum supplied, the German regulatory agency, BaFin, banned investors from shorting Wirecard stock and began an investigation of the Financial Times. German prosecutors opened up a criminal investigation not of Wirecard, but of McCrum and his colleague Stefania Palma.

Wirecard reported that it was doing half of its business through three Asian clients. Palma visited their supposed offices and found that there was no there there. They were Potemkin villages. When the Financial Times published yet another article in October of 2019, the evidence was there for everyone to see…yet Wirecard told the same lies in its defense and its stock price actually went up. But now new auditors were brought in and six months later it became clear that €2 billion in cash that Wirefraud claimed it possessed did not exist and had probably never existed. Wirecard had to take bankruptcy in June of 2020. Braun stepped down and Marsalek disappeared.

Wirecard’s was a two-decade-long fraud. How did it survive so long? Part of the answer is in how brazen its principals lied. Humans tend to think that they are good at detecting when people are lying, but generally they are not. Therefore, they are often fooled by lies told repeatedly and with confidence.

But much of what happened can be explained by our colleague Minette Drumwright of the University of Texas Moody School of Communication and her co-author, Peggy Cunningham of Dalhousie University. They have developed two important concepts in the context of long-running sexual harassment scandals (think Harvey Weinstein, Jeffrey Epstein, and R. Kelly), that also help explain long-running frauds like Wirecard’s.

For fraudsters such as Braun and Marsalek to succeed over a long period, they need the support of a network of complicity—a group of subordinates and others who support the fraudsters in a variety of ways. In addition, others in the organization and outside it often form networks of complacency in that they know of the fraud and while they do not actively and directly assist it, they are unwilling to report it or take other action to stop it.

Certainly there were Wirecard employees who were complicit in the company’s big lie. For example, to mask the €2 billion cash shortfall, approximately the entire profit that Wirecard had ever (supposedly) made, Marsalek taught employee Edo Kurniawan (who in turn taught his staff) how to “round-trip” money by shuffling it among several locations in order to fool auditors.

And, there were employees who constituted a network of complacency. They knew of the fraud, yet said nothing. Only very late in the day, as all the disclosures in the Financial Times’ articles began to seal Wirecard’s fate, did whistleblowers start to come out of the woodwork to belatedly aid journalists and regulators.

And perhaps we should speak of a network of the uncaring, encompassing those who cashed their checks not knowing, but also not caring, whether Wirecard was a big fraud. Members of this network would have included, for example, the law firms, security firms, and PR firms that Wirecard hired to sue, harass, and slander the short sellers and journalists who were slowing lifting the curtain on Wirecard’s fraud.

And then we might talk about a network of the oblivious—the auditors, financial regulators, prosecutors, and politicians who seemed to side almost automatically with Wirecard and against its critics. There’s a lot of self-serving bias (see our video:  https://ethicsunwrapped.utexas.edu/video/self-serving-bias) at play here. Certainly, EY did not wish to conclude that a humongous fraud had been taking place right under its nose for almost two decades. There’s a matter of pride, and a worry about liability at stake. By 2019, EY had to be hoping against hope that Wirecard was legitimate, and that would make its job of being an impartial watchdog protecting investors and lenders nearly impossible. The auditor’s shoddy work helped Wirecard fool investors, credit rating agencies, and the general public.

Furthermore, the German regulators, prosecutors, and politicians were proud of their homegrown fin-tech company. The self-serving bias prompted them to root for the home-grown firm and against a British newspaper. They automatically took Wirecard’s side and, unsurprisingly in light of the in-group/out-group bias (see our video: https://ethicsunwrapped.utexas.edu/glossary/in-group-out-group), distrusted British journalists and short sellers. A German parliamentary report later cited “the longing for a digital national champion” and “the German mentality toward non-Germans” as primary causes of the debacle.

Reporter Dan McCrum’s book, Money Men, tells a fascinating tale that is disturbing on many levels. That Wirecard went down in flames is satisfying. That it took so long for the company to do so is horrifying.



Jamie Bartlett, The Missing Crypto Queen: Hundreds of Countries, Billions of Dollars, One Lie (2022).

Max Bazerman, Complicit: How We Enable the Unethical and How to Stop (2022).Set featured image

Peggy Cunningham & Minette Drumwright, “R.Kelly Was Aided by a Network of Complicity—Common in  Workplace Abuse—that Enabled Crimes to Go on for Decades,” The Conversation, originally published Sept. 28, 2021 and updated June 30, 2022, at https://theconversation.com/r-kelly-was-aided-by-a-network-of-complicity-common-in-workplace-abuse-that-enabled-crimes-to-go-on-for-decades-168809 .

Peggy Cunningham, Minette Drumwright & Kenneth William Foster, “Networks of Complicity: Social Networks and Sex Harassment,” Equity, Diversity & Inclusion 40(4): 392-409 (2021).

Peggy Cunningham & Minette Drumwright, “Banning Non-disclosure Agreements Isn’t Enough to Stop Unethical Workplace Leader Behaviour,” The Conversation, Dec. 13, 2021, at https://theconversation.com/banning-non-disclosure-agreements-isnt-enough-to-stop-unethical-workplace-leader-behaviour-173574.

Minette Drumwright & Peggy Cunningham, “Unethical Newsroom Behavior: Paradoxes and a Perfect Storm,” Journalism Practice: 16(5): 963-983 (2022).

Erin Griffith, “The End of Faking It in Silicon Valley,” New York Times, Apr. 15, 2013.

Dan McCrum, Money Men: A Hot Start-Up, A Billion-Dollar Fraud, A Fight for the Truth (2022).

Michael Katz, “Former HeadSpin CEO Arrested in Alleged $80 Million Fraud,” Chief Investment Officer, Sept. 10, 2021, at https://www.ai-cio.com/news/former-headspin-ceo-arrested-in-alleged-80-million-fraud/.

Ron Lieber, “How Charlie Javice Got JPMorgan to Pay $175 Million for … What Exactly?” New York Times, Jan. 21, 2023.

Ben Taub, “The Price of Belief,” New Yorker, Mar. 6, 2023.

Natalie Walters, “A Southlake CEO Had a Lavish Lifestyle. Now He’s at the Center of a $67 Million Fraud Case,” Dallas Morning News, Mar. 27, 2023.

Gigi Zamora, “Former Billionaire Rishi Shah, Guilty of Fraud, is the Latest of the Three-Comma-Club in Trouble with the Law,” Forbes, Apr. 13, 2023.

Related Videos

In-group/Out-group Bias: https://ethicsunwrapped.utexas.edu/glossary/in-group-out-group.

Self-serving Bias:  https://ethicsunwrapped.utexas.edu/video/self-serving-bias.