“Gushing fountain of fraud in crypto and DeFi” says journalist whose reporting led to collapse of Wirecard

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Alter­na­tive Lend­ingDig­i­tal Bank­ingSav­ings and Investment

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

Image source: Dan McCrum/FT.

“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.

FT jour­nal­ist Dan McCrum was speak­ing today (Wednes­day) at AltFi’s Fes­ti­val of Finance con­fer­ence with Alt­Fi man­ag­ing edi­tor Oliv­er Smith.

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’.

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