Wirecard waves: The Israel connection of Germany’s multi-billion corporate fraud
Collapsed fintech firm allegedly processed payments for binary options scammers, while one if its executives pleaded guilty to abetting fraud in Israeli money-laundering scandal
Wirecard, the German payments company that collapsed last week in what has been described as one of “Europe’s biggest corporate frauds of recent years,” is linked to two recent major Israeli financial scandals: binary options and the ICC-Cal affair.
Once a darling of the German stock exchange, Wirecard filed for bankruptcy on June 25 after $2.1 billion went missing from its books. The company’s former CEO was arrested June 22 on suspicion of falsifying its books in order to “portray the company as financially stronger and more attractive for investors and clients,” German prosecutors said.
But while the prosecutors allege that Wirecard earned far less revenue than it claimed, there is evidence that at least some of the revenue it did earn came from processing payments for scams.
As reported by The Times of Israel and other publications, Wirecard processed payments for Israel’s widely fraudulent binary options industry, which stole billions of dollars from mom-and-pop investors worldwide. The extent of Wirecard’s processing of payments for binary options remains to be fully elucidated.
Meanwhile, one of Wirecard’s former executives, Dietmar Knoechelmann, a German man who married an Israeli woman and is now a German-Israeli dual citizen, was convicted in Israel in November 2016 of abetting fraud in the ICC-Cal money laundering scandal. The scandal was first exposed by Israel’s Globes newspaper in 2009. In 2016, Knoechelmann pleaded guilty to helping to deceive Visa and Mastercard as well as US authorities by helping to process tens of millions of dollars of payments to online gambling websites that were illegally targeting Americans.
Knoechelmann pleaded guilty to carrying out this fraudulent activity between 2008-2010. Until March 2009, he still worked for Wirecard, as a director of its Ireland subsidiary, Wirecard Payment Solutions Holdings Limited. Bizarrely, the name of the company Knoechelmann was working for at the time he abetted fraud in the ICC-Cal affair is mentioned nowhere in the Israeli government’s complaint or verdict.
Processing binary options payments
Any merchant who wants to accept credit card payments needs an “acquiring bank” or “merchant acquirer” to accept and underwrite them. The acquiring bank is required by law in many countries to make sure the merchant’s activity is not illegal and to know the true identity of the merchants’ owners and not just the identity of its directors, who may be stooges.
According to internal company documents acquired by the Financial Times, Wirecard received commissions through the end of 2017 for the processing of payments for Banc de Binary, a now-defunct Israeli binary options company that was sued by the US Securities and Exchange Commission in 2013 for illegally selling binary options to US customers. Two other major clients were the Israeli-linked binary options companies Rodeler (24option) and Hoch Capital (itrader), according to internal Wirecard documents seen by the Financial Times.
In the course of a 2018 civil lawsuit in Israel, David Cartu, owner of the Irish payment processing company Greymountain Management, disclosed documents from the company’s liquidator showing that Wirecard was one of the acquiring banks that Greymountain Management used to process binary options payments. According to Irish court filings, Greymountain Management processed payments for over 40 mostly Israeli binary options and forex websites including Porterfinance.com, Plustocks.com, OmegaOption.com, BigOption.com, BinaryBook.com, MortonFinance.com and Capmb.com among others.
The Israeli-Canadian David Cartu and his two brothers were charged by the Ontario Securities Commission in May of defrauding investors around the world out of $233 million.
Meanwhile a May 31 article in the German newspaper Handelsblatt quoted German prosecutors saying that Wirecard was a central payment processor for Option888 and a network of related binary options and other online trading websites. The article said that it has not been proven that Wirecard was aware these sites were allegedly fraudulent. Wirecard told Handelsblatt that “Wirecard Bank carries out due diligence for every new customer and continuously monitors them in accordance with anti-money laws.”
Wirecard and the ICC-Cal affair
Between the years 2006-2010, ICC-Cal, a credit card company jointly owned by Israel’s Bank Discount and Bank Beinleumi, fraudulently processed billions of dollars worth of payments for online gambling, porn (including bestiality) and sketchy e-commerce companies.
ICC-Cal was what is known as a merchant acquirer, meaning it had a license from Visa and Mastercard to “acquire” credit card payments provided it first vetted the merchants to make sure they were not engaged in illegal activity and, second, labeled the transactions of each merchant with a four-digit code that accurately reflected the nature of that merchant’s business.
What ICC-Cal did over a period of several years, Israeli judges found, was accept and acquire payments for merchants that were deceptive about their activity. It also provided false codes for these merchants’ transactions so that Visa and Mastercard would think these transactions were low risk and approve them. ICC-Cal processed billions of dollars worth of payments for online gambling companies that were targeting Americans, in contravention of the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA), an American law that prohibits online gambling companies from accepting payments from U.S. customers.
According to the judgments in two plea bargains in the ICC-Cal affair, ICC-Cal’s Israeli employees were not at first knowledgeable or well-versed in the methods of high-risk payment processing, but were approached in 2006 or thereafter by at least three men from abroad, two Germans and a Canadian, who asked ICC-Cal to process payments on their behalf. One of these German men was Dietmar Knoechelmann, who represented a company that aggregated gambling websites, and helped process American gambling payments through a digital wallet.
Knoechelmann pleaded guilty in November 2016 to abetting payment fraud in the ICC-Cal affair but at no point in the complaint or verdict is the name of the company or companies he represented mentioned. He carried out this fraudulent activity between 2008-2010.
Until March 2009, he still worked for Wirecard, as a director of its Ireland subsidiary, Wirecard Payment Solutions Holdings Limited. In 2017 The Times of Israel asked the Justice Ministry the name of the company on whose behalf Knoechelmann had worked while engaged in abetting fraud, but the ministry said that as part of its plea deal with Knoechelmann, it had agreed to keep the name of the company under wraps.
Knoechelmann was sentenced [Hebew link] to six months of conditional imprisonment, a fine of NIS 1.5 million ($436,000) and required to disgorge an additional NIS 7.5 million ($2.2 million) in profits he earned from the scheme.
The CEO of ICC-Cal at the time, Boaz Chechik, was sentenced in 2018 [Hebrew link] to four months of community service and a fine of NIS 350,000 ($102,000) while his deputy Steve Greenspan was sentenced [Hebrew link] to six months of community service and an NIS 100,000 ($29,000) fine. Shay Ben Asulin, another defendant in the case, was sentenced to five months of community service and a fine of NIS 1.5 million ($435,000). In 2008, Ben Asuilin became one of the founders and directors of AnyOption, one of Israel’s first binary options companies.
ICC-Cal itself was ordered [Hebrew link] to disgorge NIS 85 million but was not indicted.