More than half a dozen websites that securities regulators alleged stole money from novice investors in the U.S., Canada and elsewhere have one thing in common: They all used Wirecard AG, the German technology company that collapsed after an alleged multibillion dollar fraud of its own.
The websites, which specialized in binary options, all-or-nothing bets on financial markets, collected investors’ money via Wirecard’s card payments network, according to internal documents seen by The Wall Street Journal and former company executives.
In one instance, a then-senior Wirecard executive helped set up a separate payments company that stood between investment websites and payments systems such as Wirecard, according to an ex-employee of the separate payments company. The setup helped the investment websites operate with less scrutiny from credit-card networks that monitor transactions, according to the person and a civil lawsuit filed by the Commodity Futures Trading Commission.
Nearly a year after Wirecard acknowledged $2 billion of missing cash on its balance sheet, investigators in Germany are still picking apart what went wrong. While large parts of Wirecard’s business processing credit-card payments for merchants and passing money to banks appear to have been faked, according to German prosecutors, there also were real clients.
Among them were businesses at the underbelly of the economy including unregistered investment companies, as well as offshore gambling operations and pornography operations, according to former company executives. Processing credit-card transactions for these clients generated higher fees, according to the former company executives.