This is an audio transcript of the FT News Briefing podcast episode: ‘Wirecard on trial’

Jess Smith
Good morning from the Financial Times. Today is Tuesday, December 20th, and this is your FT News Briefing.

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A top US video game developer is coughing up a pretty epic settlement. A key witness in Germany’s Wirecard scandal testified in court yesterday. Plus, more and more wealthy Chinese families are setting up private investment offices in Singapore.

Mercedes Ruehl
The numbers are quite staggering. Lawyers and advisers are telling us that by the end of this year, it could be up to 1,500, potentially more.

Jess Smith
I’m Jess Smith, in for Marc Filippino, and here’s the news you need to start your day.

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A leading video game developer will pay more than half a billion dollars in settlements with US regulators. The US Federal Trade Commission claims that Epic, which is known for its popular game Fortnite, illegally collected data on children and manipulated players into making unintentional purchases. FTC chair Lina Khan said the company used default settings and deceptive interfaces to trick users. Epic did not admit wrongdoing as part of the settlement, but it did make changes to its payment systems.

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A former Wirecard executive testified in a Munich court yesterday and described the company as a scam right from the start. Wirecard is the German payments company that collapsed two years ago in one of Europe’s biggest ever accounting scandals. Three former executives are now on trial. The FT’s Dan McCrum led a team of investigative reporters who exposed the Wirecard fraud. He says this trial is enormously important for Germany.

Dan McCrum
Because Wirecard really damaged Germany’s reputation as a place to do business, as a financial centre, because it was such a huge fraud hiding in plain sight and one the government repeatedly defended. But really, I think so many people lost money, billions and billions of euros, that there’s a need for sort of someone to blame, some sort of closure.

Jess Smith
Dan, yesterday’s testimony came from Oliver Bellenhaus. He’s the executive who turned himself in, turned state’s witness and yesterday testified against his former colleagues. What can you tell us about him?

Dan McCrum
So Oliver Bellenhaus ran sort of the main fraudulent business, basically from his apartment in the Burj Khalifa, the world’s tallest building. And other people in the company tended to keep him at a bit of a distance because he was a strange character. I mean, total maniac racing car driver. And he also had some pretty extreme political views as well. So people didn’t like to get too close to him. But also, I think that served a purpose because Wirecard told everyone internally that they were doing the sort of the slightly more problematic payments processing.

Jess Smith
Dan, another of the three executives who has yet to testify is former chief executive Markus Braun. And while Bellenhaus, who we heard from yesterday, flipped, Braun is doing the opposite.

Dan McCrum
And so Markus Braun says he’s completely innocent. He knew nothing about it. And because he was very careful, Wirecard operated at a senior level largely on Telegram, the messaging app. And those records? Well, they’re not around anymore. So in order to make their case, I mean, there’s lots of other bits of evidence and documents, but not what you would call the smoking gun, where chief executive Markus Braun says, “Right, you lots go commit fraud.” So they’re relying on this witness, the guy who is supporting the prosecution, Oliver Bellenhaus. But, you know, he’s a crook. And so certainly the game here is to try and paint him as the bad guy, not Markus.

Jess Smith
Dan, how strong a case do you think German authorities have?

Dan McCrum
So Markus Braun has been held in custody for two years, which suggests that the German authorities think they have a strong case against him and have been able to persuade the judges of that. I think the charge list was 84 pages long and took five hours to read out against these three. So it seems highly likely that Markus Braun will be convicted of something. Market manipulation? But whether they can pin the whole thing on him, you know, prove that he was the architect, the driving force behind this fraud — that will be very interesting to see.

Jess Smith
Dan McCrum is an investigative reporter for the FT. Thanks, Dan.

Dan McCrum
My pleasure. Thanks for having me.

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Jess Smith
In China, the government lockdowns and the crackdown on inequality has spurred many wealthy Chinese to move their money abroad to safer financial hubs like Singapore. More and more Chinese are setting up family investment offices in the south-east Asian city state. The FT’s Mercedes Ruehl is in Singapore. She’s been reporting on this and joins me now to talk more. Hi, Mercedes.

Mercedes Ruehl
Hello. How are you?

Jess Smith
I’m good, thanks. So, Mercedes, how many family offices have been set up and how much money are in these offices? How much money are we talking about?

Mercedes Ruehl
The numbers are quite staggering. At the end of 2020, there were about 400 of these, according to Singapore’s regulator. By the end of 2021, that number had risen to 700. And now lawyers and advisers are telling us that by the end of this year, it could be up to 1,500, potentially more. So applicants have to increase assets under management to 20mn within a two-year period. You start with 10 and then you have to increase that to 20. So you would assume, if you’ve got 20mn to put into one of these things, you have a lot more.

Jess Smith
You also reported that these firms are hiring thousands of investment professionals and they’re often poaching them from big global banks. And all these firms are starting to resemble a hedge fund industry. What did you mean by that?

Mercedes Ruehl
Initially, a lot of these funds have been pretty conservative. They’re focused on things like publicly listed equities, Chinese like property as well. But what we have been told by bankers, who have had many of their staff poached by some of these funds, said that their risk appetite is rising and they’re expected to behave more like hedge funds. So they’d fit the investor profile of what we see from global hedge funds, um, investing in more kind of complicated financial products.

Jess Smith
Mercedes, what would make a banker leave a big global bank and jump to one of these private family firms?

Mercedes Ruehl
From what we can understand from some of the investment banks we spoke to that have lost people to some of these funds, they’re actually earning the same amount of money, if not more, from some of the larger wealthy families. It’s also a way to avoid maybe some of the politics of the big bank and be a bit more independent.

Jess Smith
What does this all mean for Singapore?

Mercedes Ruehl
I think ultimately this is a good thing for Singapore. I think they were a little taken aback by the flood that came. I think nobody kind of quite expected the pandemic forces at work and then that common prosperity crackdown in China. So ultimately, yes, it is a good thing for Singapore. I mean, this is a city that is trying to position itself as not just the leading financial hub in Asia, but also a leading hub globally for finance and for business and particularly for asset management.

Jess Smith
I understand you spoke to some wealthy Chinese individuals who are parking their money in Singapore. And I’m curious, what kinds of things did they tell you? Are setting up these firms a sign of frustration with Beijing? And do they see Singapore as a safe haven?

Mercedes Ruehl
No. And this, I mean, this guy, this guy that I spoke to, he genuinely, he said, “Yes, it is low tax. Yes, it is politically stable. Yes, there, it is easy for capital flow in and out of Singapore. But I still believe in China. I still, you know, I still have assets in Hong Kong. Singapore, for me, is also about accessing where I see growth. And for me, a lot of that growth is south-east Asia and Singapore is kind of such an important hub for south-east Asia.

Jess Smith
Mercedes Ruehl is based in Singapore for the FT and she covers south-east Asia. Thanks, Mercedes.

Mercedes Ruehl
Thank you.

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Jess Smith
You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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