The biggest scandal in The European Tech world just happened and here is what you need to know.
In the world of freelancing, you are constantly worried about money. You constantly transfer them from one account to another, deal with pending invoices and clients who try to cut your rates as low as possible. However, in the era where absolutely everything is digitalized, you don’t expect to lose all of your money at once. Especially you don’t expect to lose all of your money overnight.
Well, the worst has just happened.
On June 25, 2020, Wirecard filled for bankruptcy.
For those not familiar Wirecard is the company that makes the card that Payoneer issues to its clients. Payoneer as a company can’t produce the Mastercard cards that its 4 million users use daily so they work with Wirecard. So far so good.
The 4 million users have various amounts of funds on Payoneer because not only individuals but also companies use Payoneer as one of the most efficient ways to send, receive, and withdraw funds all around the globe. In the past, there have been minor issues with Payoneer but nothing major that would at any point suggest that Payoneer or Wirecard are disloyal or untrustworthy.
How did this happen? How Wirecard bankrupted?
First of all the word bankruptcy is too strong and the media jumped too fast with scandalous titles like “The Money is Gone: Wirecard Collapses owning $4 billion” and “Wirecard — There’s No Value Here. It’s Dead And Bankrupt” when the truth is that it only filled for insolvency.
Here are the official definitions for insolvency and bankrupt
Although synonyms these two words are very different and the main reason for stressing it out is the little speck of hope that is left to everyone associated in any possible way with Wirecard.
Now to the basics.
The German tech industry star as Business Insider likes to call it has had a rather exciting week after they simply couldn’t find the $2 billion missing from their official audit reports. Quickly, it is very clear that that amount of money didn’t exist in the first place and that this is all just a fraud. The detailed timeline of the downfall is summarized and nicely explained in an article from Business Insider Here’s how Wirecard went from analyst darling to a $2.2 billion accounting scandal — and cost SoftBank hundreds of millions in the process.
The CEO of Wirecard, Marcus Brown first resigned from the position and shortly after that was arrested under the claim that he intentionally inflated the numbers to paint a false picture in the media. The entire story of the arrest and accusations is explained by CNN Business in an article named “Wirecard’s former CEO Marcus Brown arrested after $2 billion scandal explodes”
So how this affected Payoneer?
As mentioned earlier Payoneer works closely with Wirecard, especially on the production of the cards which 4 million people use every single day. However, here is the least expected plot twist.
Apparently, there are 2 Wirecards. Wirecard AG in Germany which is currently in the middle of the scandal and Wirecard Card Solutions Limited (WCSL) which is located in the UK. Payoneer works with the later. However, since both companies are under the same ownership “The UK’s Financial Conduct Authority (FCA), which oversees WCSL, decided to restrict WCSLs activities to further protect customer money. As a result, a temporary freeze on all card activities is in effect” (Payoneer blog, 2020).
The freeze which became effective on Friday, June 26, 2020, immediately affected all 4 million customers all around the globe. This led to a global panic where individuals and businesses were wondering what to do and what will happen next.
Payoneer was pretty transparent with the issue and they immediately published detailed information on their blog blog.payoneer.com assuring all parties involved that their money is safe and secure and that soon everyone can transfer the money to banks in their home countries. They sent emails to all accounts, made the customer service respond as quickly as possible to all phone calls and chats and the situation calmed down.
However, we all know that “If you want to hide something put it plain sight (or on the second page in Google)” and these statements didn’t ease the situation. They sounded rather shady and vague.
The rather scruffy video of the Payoneer CEO, Scott Galit, with his disheveled t-shirt and blazer, frightened look while reading the statement from the screen just screams “we are in trouble” and sparked another wave of suspicion toward millions of freelancers and business owners around the world.
And the comments under the video are falling into two categories:
- Why you didn’t tell us anything until now
2. We need our money for food, rent, and necessities
What about all the people who have their money frozen?
While Payoneer, FCA, and Wirecards are trying to solve this messy situation there are millions of people around the world who have a) savings, b) monthly salaries frozen on the account.
Another video was published with the Payoneer’s COO, Keren Levy, which ASSURES all affected parties that their money is safe and that they are working on unfreezing the cards.
Her scared look is not very trustworthy, judge for yourself
And she says is that she is in the Payoneer customer service center (it is her first sentence) on Sunday morning June 28, 2020, when the customer support is working only Monday to Friday, and once it is after 5:01 pm on Friday, the customer support is not answering to anyone. Who are these people talking to? When was this video filmed? Is this staged?
From Payonner official website
note: I tried contacting the customer support chat during the weekend and I didn’t get an answer.
The comments under this video are also not so positive and mainly requesting a refund
As of Sunday night, all affected parties have spent the weekend in limbo with many ups and downs.
What we know for now is:
- The money is safe
- FCA is working around the clock to finish the audit with Wirecard UK by June 30th the latest
- The cards will be unfrozen at one point in the future (no specific date yet)
- Freelancers need to work with home banks to transfer the money from Payoneer to a bank account
I don’t think I have ever seen in my life so many people being excited for Monday morning.
What do you think about this situation? Are you affected by this scandal? Please share your thoughts in the comments below.