Post-Publication Discussion (appendices and links to all the material are provided in these downloads – scroll down past the updates)

Financial Failures and Scandals: events in 2021 year-to-date (June 2021)

April 2021:
Sanjeev Gupta and Greensill
‘Five years ago it was all about little red boxes. In 2016, steel tycoon Sanjeev Gupta’s team began scouring the market for used diesel generators, planning to take advantage of subsidies for power from renewable sources such as cooking oil.
Project LRB — named after the shipping containers that housed the generators — saw Gupta securitise the subsidies and sell the income to Swiss fund manager GAM via £600 million of bonds. But Gupta was unable to find a cost-efficient fuel. GAM fell into crisis and he was forced to buy back the bonds.
Those little red boxes were an early warning. Now big red lights are flashing over Gupta’s GFG Alliance empire, which stretches from Lochaber in Scotland to Whyalla in Australia and employs 35,000. There are signs that Gupta’s financial engineering — carried out with Greensill Capital, the finance firm whose collapse has tarnished the reputations of David Cameron and the late Sir Jeremy Heywood — has put huge sums of investors’ money in jeopardy’.

Greensill was paying on future or circular Gupta invoices. When Covid struck those future orders evaporated and the Greensill failed.
‘Sanjeev Gupta’s Liberty Steel raised cash from finance firm Greensill Capital by selling steel that it then planned to buy back itself, stoking concerns about how his stricken empire was funded.
Documents seen by The Sunday Times show that Liberty Steel Newport in south Wales used a circular trading scheme whereby it sold steel to a company with close links to the tycoon, which another Gupta business was then to buy back.
That £2.5 million sale allowed Liberty to borrow from Greensill via invoice discounting. Liberty was then free to sell the same steel again, this time to a different customer, and raise more cash from Greensill against that second sale.
The circular transactions raised alarm among several of Gupta’s staff. The disclosure sheds light on the risky financing that helped turn Gupta’s GFG Alliance into a $20 billion turnover empire employing 35,000 staff in just five years’.

‘The ensnaring of the political elite in the scandal of Greensill Capital, the supply chain finance company whose collapse has exposed an underbelly of cronyism, greed and alleged corporate malpractice, has provided riveting drama. Revelations of lobbying on its behalf by David Cameron, patronage of its charismatic founder by the late cabinet secretary Sir Jeremy Heywood and the undisclosed presence on its payroll of Bill Crothers, the government’s former chief commercial officer, have also raised serious questions about standards in public life’.

Wirecard again:
The failure continues to reported and seems to involve vast amounts fraud. Wirecard employees removed millions in cash using shopping bags. Prosecutors suspect funds linked to hidden payments operations in Asia.
Though Merkel has defended that there was anything irregular about her lobbying for Wirecard in China in 2019. She felt here was no reason to assume at the time there were serious irregularities at ‘the fraudulent payment company’.

March 2021:
Sanjeev Gupta and Greenshill:
Collapse of Greensilll and the knock on effect on Liberty Steel.
Audit giant Grant Thornton accused of conflict over role in Sanjeev Gupta’s takeovers.
Grant Thornton is overseeing Greensill collapse and also did deals for tycoon.

Oliver Shah writing in the Sunday Times made these observations of the Gupta empire:
‘They have been making steel in Rotherham and Stocksbridge since the 19th century. Nationalised in 1967, privatised in 1988, merged with a Dutch group in 1999, taken over by India’s Tata at the market peak in 2007 and sold to Sanjeev Gupta in 2017, the steelworks have often faced an uncertain future. But it has rarely looked as bleak as it does now.
Gupta, a chancer-turned-industrialist, is staring at the likely collapse of his global steel-making empire, the GFG Alliance, after the demise of its main funder, Greensill Capital. If GFG falls into administration it will almost certainly drag down the plants at Rotherham and Stocksbridge, which make parts for car and aircraft giants, as well as other sites employing a total of 5,000 in the UK’.

February 2021:
Luckin Coffee files bankruptcy in the US.

Autonomy rolls on:
Mike Lynch begins extradition battle with US over Autonomy takeover. Larry Ellison, the founder of Oracle, clashed with Mike Lynch over the value and takeover actions. Some believe that Autonomy flattered its financial position and so sell itself for a vastly inflated price to Hewlett Packard. It will be remembered that HP ended up writing off $8.8 billion.

Wirecard rumbles on:
‘The chief executive of collapsed payments company Wirecard tried to intimidate the group’s chair in the run-up to the publication of a special audit by KPMG in April 2020, German MPs heard on Thursday during a parliamentary hearing on the scandal.
After the supervisory board gave KPMG six more days to investigate alleged accounting manipulations on April 21, it gave CEO Markus Braun detailed guidance about the facts that needed to be mentioned in a required regulatory statement.
Braun, who argued internally that the KPMG report was “factually wrong”, subsequently warned Wirecard chair Thomas Eichelmann that he would be on the hook for losses caused if the statement was too negative’.

January 2021:
For once little claim of financial failures other than those due to Covid and the switch to online from retail bricks and mortar. Many takeovers and closures though.

Financial Failures and Scandals news in 2020

New FRC and other events (November 2020)
30 October: Logistics Group Holdings (owned by the billionaire Barclay family), which is behind the Yodel and ArrowXL businesses, has cautioned in its latest set of accounts for 2019 that there is a “material uncertainty” over its status as a going concern. This could be the first of many such similar statements due to the pandemic.
25 October: The set of banks that steered The Hut Group towards its stock market listing have raised red flags over the company’s governance – a month after sharing £35 million in fees.

FRC says companies must improve COVID-19 reporting (October 2020)
UK companies should have disclosed more information to their investors about the impact of the pandemic. The FRC  has found, in its first review of corporate reporting since the onset of the pandemic. In a study of financial statements covering periods to the end of March — across eight sectors including retail, real estate, and aviation — the FRC judged that most contained “sufficient” information on the effect of Covid-19 on performance. But some, especially half-year results, needed “more extensive disclosure” to help shareholders understand how the virus had changed the outlook for months and years ahead.

Wirecard (October 2020)
More and more information is coming to light. It seems that everyone warned everyone. There was a failure of the auditors, of the regulators, and of the German government. Everyone bought into the Wirecard success story which, as it happens, was built on sand.
It turns out that McKinsey warned Wirecard managent one year earlier to take immediate action on internal controls. But then management failed to act and then passed the consultancy project over to PwC. Nice, if you do not like the conclusions of your consultants, just hire another consultancy firm. Of Course, EY also warned that Wirecard that the KPMG special audit, delivered a few month before the collapse, risked misinterpretation and needed more information on payments group’s third-party business. Olaf Scholz, Germany’s finance minister, defended his handling of the Wirecard scandal insisting the authorities had done all in their power to uncover irregularities at the company. Something that is patently untrue. German politics was solidly behind Wirecard. There were also plans for Wirecard to takeover Deutsche Bank. Though it now appears that there have been whistleblowers from as far back as 2016.

The picture that emerges of the Wirecard businesses that did exist is a stark contrast to the one painted by former chief executive Markus Braun, who hailed the group as a highly profitable pioneer in the payments industry. It reveals the scale on which the company, Germany’s biggest corporate fraud in decades, also misled investors about its real businesses. In fact, the non-Asian business racked up huge pr-=tax losses.

The problem left local business and people scrambling as they were locked out of their payment processing systems. Cafés, restaurants, hotels, and mobile network providers were left with no payment processing systems after the Monetary Authority of Singapore, the de facto central bank, ordered Wirecard to cease payment services in Singapore.

Some good may come of this as PwC pledges to review fraud detection after Wirecard scandal shakes their industry. But shouldn’t they have done that anyway?

However, EY faces mounting backlash after Wirecard whistleblower revelation: one of the accountancy firm’s own employee’s flagged potential fraud at Wirecard four years before the company collapsed. Even they missed their own investigation in March 2017 (Project Ring).

Wirecard (September 2020)
The jury is out as to exactly what happened with Wirecard. The company offers its customers electronic payment transaction services and risk management, as well as the issuing and processing of physical cards. From 2006, Wirecard moved into banking. It was licensed by Visa and Mastercard, meaning it can both issue credit cards and handle money on behalf of merchants. This unusual hybrid of banking and non-banking operations makes its accounts harder to compare with peers, and helps persuade investors to rely on the company’s adjusted versions of financial statements.

Wirecard: History of earlier warnings (September 2020)
The full history can be seen in the FT article on Wirecard’s timeline[1]. Wirecard became one the 30 companies in the DAX.

2008: The head of a German shareholder association publishes an attack on Wirecard, suggesting balance sheet irregularities. EY is appointed to conduct a special audit, and the following year replaces the small Munich firm that had previously acted as group auditor. The German authorities eventually prosecute two men in connection with the attack, who had not disclosed positions in Wirecard stock.

2010-2014: Rapid expansion in Asia. Investors are drawn to Wirecard’srapid growth and claims of superior payments technology.

2015: FT raising questions about inconsistencies in the group’s accounts and a €250m hole in the group’s balance sheet. Wirecard made its largest-ever takeover, of Indian payments businesses in a €340m deal[2]. J Capital Research reports that Wirecard’s operations dotted across Asia are far smaller than it claims.

2016: Short-sellers and the FT start a campaign. Allegations of money laundering were denied by Wirecard and BaFin (Our equivalent of the FCA). Wirecard announces it is buying a prepaid payment card business from Citigroup, entering the US market.

2017: A EY clean audit and better reported cash generation leads to renewed investor enthusiasm. Bought Citigroup’s Asian payment processing operations.

2018: Wirecard’s Singapore HG triggers an investigation into members of their team following a whistle-blower’s allegations. By August Wirecard is valued at €24bn and claims it has 5,000 employees, who process payments for about 250,000 merchants, issue credit, and prepaid cards and provide technology for contactless smartphone payments. Whistle-blowers contact FT.

2019: The Singapore police raid Wirecard’s offices. BaFin announces a two-month ban on short selling, citing Wirecard’s importance for the economy. The FT reports that half of

Wirecard’s business is actually outsourced, with the payments processing handled by partners who pay Wirecard a commission. FT find further detrimental material and Wirecard threatens to use the FT. Wirecard raises nearly €1bn.


FT finds most of the profits are generated by three partner companies in Philippines, Singapore and Dubai. EY approves accounts. FT continues its campaign and Wirecard responds saying ‘nothing to see here’.
Late 2019: Wirecard raises new bonds. Wirecard uses FT. The FT publishes documents indicating that profits at Wirecard units in Dubai and Dublin were fraudulently inflated, and that customers listed in documents provided to EY did not exist. Under pressure from investors Wirecard appoints KPMG to conduct a special audit, which it says will clear it of wrongdoing – but in fact in 2020 KPMG reports negatively. FT finds other issues.

2020: KPMG report delayed then published. it can not verify that arrangements responsible for “the lion’s share” of Wirecard profits reported from 2016 to 2018 were genuine, citing “obstacles” to its work. Then Markus Braun (CEO) reports to investors that EY have no problem at all to sign off the audit 2019. But publication of results is postponed to June. Any wrongdoing is denied. 2020 June 16 onwards: The Philippine banks BPI and BDO inform EY that documents supposedly detailing €1.9bn in balances are missing,  CEO resigns. He and other are arrested. Wirecard acknowledges for the first time the potential scale of a multiyear accounting fraud. 25 June Wirecard files for insolvency. Markus Braun bailed but under possible criminal charges. The CFO, head of Paycard Payments Unit in Dubai and others were arrested.

One issue that cropped up during these arrests was that of Jan Marsalek, the COO, who has now disappeared although there is an international arrest warrant out for him. As the FT reported[3] he has led multiple lives, with complicated and overlapping commercial and political interests. Sometimes those interests cleaved to Wirecard’s aggressive expansion plans in frontier markets. Sometimes they coincided with his own sprawling and unusual range of personal investments. And sometimes they seemed to fit neatly with the work of Russia’s intelligence agencies. He was known to be recruiting 15,000 Libyan militiamen.

Wirecard: Profitability in doubt?
These are the accusations. Money laundering. Profits made from a few customers. Most of the business loss making in Europe.Many customers being pornographic or gambling sites. In addition, it now it transpires there are possibly all sorts of other errors. Financial planning undertaken on large spreadsheets with errors (duplicate clients and wrong currency conversion are rumoured) and the bulk of the business coming from clandestine pornographic sites: with the bulk of the business coming from a handful of large clients.

Wirecard: failure of the auditors (EY)
The FT[4] reported that EY failed for more than three years to request crucial account information from Singapore’s OCBC bank where Wirecard claimed it had up to €1bn in cash. This is normally a routine audit procedure that could have uncovered the fraud. The FT also reported that the auditor between 2016 and 2018 did not check directly with the OCBC Bank to confirm that the lender held large amounts of cash on behalf of Wirecard. The FT claimed that instead, EY relied on documents and screenshots provided by a third-party trustee and Wirecard itself. The FT quoted:

“The big question for me is what on earth did EY do when they signed off the accounts?” said a senior banker at a lender with credit exposure to Wirecard. A senior auditor at another firm said that obtaining independent confirmation of bank balances was “equivalent to day-one training at audit school”.


The head of audit at a rival accounting firm to EY said: “It is beyond the realms of reality that EY wouldn’t have had [the bank balance confirmations] unless they did a very poor audit. Cash is easy to audit. If investors can’t trust the cash number, what can they trust?”
Hansrudi Lenz, professor of accounting at Würzburg University, told the Financial Times that it was “not sufficient” for an auditor to rely on account confirmations that were provided by third parties. “The auditor needs to have full control over the delivery of account confirmation,” he said, adding that this was stipulated by procedural guidelines. 

Wirecard: Failure of the regulators

Germany in the aftermath of the Wirecard scandal is doubling down and rewarding the regulator that seemed to turn a blind eye. This seems to be a backwards step rewarding the authority that failed to notice any warning signs despite numerous indications. At least in the UK, when something has gone wrong it is noticed and mostly investigated and revealed. This looks to me as if the errors are being swept under the carpet.

BaFin is the financial supervisory authority in Germany equivalent to our FCA. The other two bodies are the Financial Reporting Enforcement Panel [FREP] and the German Audit Oversight Body (Abschlussprüferaufsichtsstelle [APAS]). These two bodies cover the enhanced role of our FRC.

BaFin that banned investors from short-selling against Wirecard shares for two months. This was the first such restriction on an individual company in German stock market history. And as the press reports that was quickly followed by a criminal complaint against two FT journalists who had reported the whistleblower allegations about the payments company.

The head of the equivalent of our FCA (BaFin) now claims that it was not his agency’s job as Wirecard was classified as a technology company rather than a financial services provider. Pretty weak as the same agency bent over backwards to help Wirecard previously. Even if now it appears the company was engaged in money laundering activities. Yet BaFin backed Wirecard previously in an unpresented move to defend Wirecard`.

The Economist’s view[5]
Apart from extolling the virtues of short-sellers, who started the rumours back in 2008, their view is:

Wirecard’s rise and fall is a case study in the carnage possible when a firm’s accounting goes awry but national regulators and big investors are so seduced by the company’s narrative that they cannot, or will not, see it. It is also a reminder of how markets stand to benefit from short-sellers—who try to make money betting against listed firms, by selling borrowed shares and buying them back later at a lower price. Had the warnings from Cassandras who detected a bad smell around Wirecard years


ago been heeded, billions of dollars of losses, many of them borne by pension-fund investors, could have been avoided.
Big banks and investors, including Deutsche Bank and its DWS fund-management arm, backed Wirecard and kept the faith, in some cases doubling down, even as more and more red flags popped up. Many did scant due diligence, instead relying on puff pieces churned out by sell-side analysts right to the end: half a dozen still had buy recommendations on the stock when Mr Braun resigned. Wirecard’s auditor, EY, faces scrutiny, too. German media, for the most part, swallowed Wirecard’s line that it was the victim of a nefarious plot by Anglo-Saxon marauders.
When so many supposedly clever people can get it wrong, anything that injects scepticism is welcome. Such counterweights to market consensus are especially helpful when politicians and central banks are boosterish on asset prices, as they are now, and in countries with a corporatist mindset. Even as Germany has embraced shareholder capitalism, the view that company managers are more trustworthy than their shareholders, especially less patient ones, has proved stubbornly persistent.

FinTech, City, Schadenfreude, Brexit and Wirecard

As Simon Duke in The Times (on Tuesday 30 June 2020) said Schadenfreude (originally German), joliemaligne (in French) represent the happiness we feel when someone else fails. Wirecard failed and perhaps there could have been some of that feeling in the City. How the German financial institutions fell after solidly sticking behind Wirecard[6].

That is not all. The Times (James Hurley again) claimed that the FCA was given details of an operation whereby allegedly bogus ecommerce sites were used as a front for channelling online gambling proceeds through the international payments system[7].  Fintech – will they benefit from Wirecard’s fall? The big surprise is that there are over 100 newish FinTech companies. Everyone must have seen the Starling’s bank’s advert of a helicopter garden shed. However, there are many more and the number is still rising. See this link for a list. They can’t all survive and prosper surely[8]?

The next problem for financial services is that current Brexit negotiations are not going well and time has run out. Equivalence of rules and the European Court of Justice are sticking points which may mean the City loses its financial supremacy. In my opinion that is Europe’s loss as the winner will be New York, Singapore and Shanghai[9].

That however is not the point as Donald Brydon (as in his audit review) has said: “[Audit] firms should have the obligation to find fraud rather than stumble over it”. As reported by the notable Tabby Kinder[10]:

The final conclusion? Nothing may happen. If anything it will probably come down to the regulatory authorities in Germany not being powerful enough or sufficiently sceptical of management. And that includes the auditors. The same criticism has been levelled against the FRC and FCA over previous failures of which Carillion probably caused the most criticism.


These failures can never be fully eliminated but I believe they can be reduced. One again, the reliance investors can place in the audit process as being the final check on management is thrown into doubt – regardless of how sophisticated fraud. And Wirecard does not seem to be that sophisticated. Everyone just believed their public statements and news releases[11].

Commentary and Breaking news June 2020

Wirecard Accounting Saga June 2020
Wirecard finally admitted its errors. It was 1st February 2019, when the FT and then Bloomberg first reported the story of a decline in share value amidst allegations of accounting irregularities in Singapore and other countries in Asia and the Far East. Wirecard’s management has consistently denied any accounting wrongdoing or lack of internal controls. In May 2020, the results of a company-commissioned special audit by KPMG were released. KPMG found that they could not verify the lion’s share of Wirecard’s operating profits between 2016 and 2018 were genuine.

Until now Wirecard has categorically denied any impropriety and have consistently claimed that the conclusions drawn by the FT about the files were incorrect. The auditors (EY) came up trumps and warned that they had found evidence that related parties of the Wirecard bank had attempted to deceive the auditor and had provided spurious bank balances – and refused to sign off the annual results in June 2020. On the 16th June, they postpone issuing their annual accounts. On the 18th Wirecard admitted that €1.9bn of cash was missing. The next day Wirecard’s chief executive Markus Braun has resigned. It is alleged that the two Asian banks where some funds were supposed to have been transferred claim they never received the money. Now a criminal investigation is being launched in Germany and Markus Braun has been arrested.

Shares crashed from a high of €192 at its they day. Wirecard was a German financial technology group. The company joined the exclusive DAX 30 stock market index in 2018 on a wave of investor interest which valued it at €24bn, more than Deutsche Bank, and earned it a place in pension funds around the world. A meritorious and important rise for Germany (post SAP the software company’s much earlier rise).Shares fell as low as Euros 12 towards the end of June 2020 valuing the company at less than €5bn. The FT reported that missing cash was equivalent to all the profits the group had declared since 2012. This puts Wirecard at the mercy of potential recalls of loans. So Wirecard’s future is now in doubt. The company had a m monumental and glittering rise but the accounting and financial controls failed to keep up with its meritorious rise (shades of Patisserie Valerie?).

Knock-on effects may be to hit British financial tech companies using Wirecard’s services such as Revolut and Monzo. British users of Wirecard’s services may have to move their payments business elsewhere.

Reporting landscape: Other Cases in June 2020
Barclays Bank is in the news again. Although the SFO gave up on the prosecution of Barclays over the finance and other deals with Qatar back in 2008, Amanda Staveley’s PCP Capital Partners has launched a high-profile civil trial for £1.5bn.

Other companies in trouble or trying to raise emergency funding include Ted Baker, Warehouse, Oasis, Monsoon, Quiz, Go Outdoorsand others. Many might be disposed of in pre-pack administration. Boohoo has done well in the pandemic (rapid response, youth appeal, new athleisure-wear and celebrity input?) came under fire for the value of its shares in Pretty Little Things and to resolve the issue bought the entire company and also went on to buy Oasis and Warehouse. Boohoo is now worth more than combined market capitalisations of Marks & Spencer and Asos.

Contraction and closures continue on the aftermath of the pandemic. This includes the Restaurant Group (including the chain Frankie & Benny’s), Carluccio’s, Pizza Express, and other. Cath Kidston closed in May.
Simec Atlantic Energy half owned by steel tycoon Sanjev Gupta is looking for Chinese partners.

Tesco is in the news again, this time trying to resits resisting pressure to axe a £1.6 million bonus for its departing boss (Dave Lewis) as shareholders prepare to inflict a humiliating defeat on the supermarket.

The founders of a failed peer-to-peer lending platform, Lendy, have had their assets frozen after administrators alleged that they had channelled £6.8 million to offshore companies for their own benefit.

The London Capital & Finance (LCF)scandal has put two companies connected with the failed mini-bond business into administration. These were London Power & Technology and LPE Enterprises. Both businesses were part of a complicated web of companies linked to London Capital & Finance. (This company was accused as one of the biggest scandals to have hit investors in recent times).

Metro Bank among other banks may experience a large rise in bad debts.

SIG roofing specialist was rescued by a US private equity company (Clayton, Dubilier & Rice).

Private equity June 2020
Handful of mainly US groups on spending spree despite worldwide lockdowns to halt coronavirus. For example KKR snapped up cosmetics firm Coty. In fact it has been reported that the top 10 ranking private equity groups by deal count have announced deals worth more than $40bn since the beginning of March 2020.

The dash to raise equity June 2020
According to the FT and others publications, new equity has risen to more than 33% of share capital and discounts have widened. At the moment it seems that large companies have access to liquidity and secured waivers to debt covenants. That said the FT commented that: “a solvency crisis looms once groups draw down on overdrafts and jack up their balance sheets with borrowings they can’t pay off”.

Commentary and Breaking news updated May 2020

A coronavirus case-study
The case of Hin Leong: funnily enough one of the first casualties where the corona virus threw up a possible fraud was a Singapore company called Hin Leong an oil trading company. Auditor: Deloitte which stands by the air auditor though there are discrepancies of upwards of US$4 billion. The extent of the financial problems at Hin Leong Trading only became clear to its lenders recently. Under pressure to pay down billions of dollars in loans as crude prices crashed and demand slumped because of the coronavirus pandemic, he made a jaw-dropping admission.

The crisis will expose much corporate fraud. So the Economist reckons[i]:
‘Booms help fraudsters paper over cracks in their accounts, from fictitious investment returns to exaggerated sales. Slowdowns rip the covering off. As Baruch Lev, an accounting professor at New York University, puts it, “In good times everyone looks good, and the market punishes you harshly for not keeping up.” Many big book-cooking scandals of the past 20 years emerged in downturns. A decade before the crisis of 2007-09 the dotcom crash exposed accounting sins at Enron and WorldCom perpetrated in the go-go late 1990s. Both firms went bust soon after. As Warren Buffett, a revered investor, once put it: “You only find out who is swimming naked when the tide goes out.” This time, thanks to a pandemic, the water has whooshed away at record speed.’

Often and increasingly it is the short sellers and research firms that blow the whistle. Muddy Waters, Citron, Grizzly Research and others included. Muddy waters was instrumental in many of the case mentioned in the main book.

The first coronavirus case
The case of Hin Leong: funnily enough one of the first casualties where the coronavirus threw up a possible fraud was a Singapore company called Hin Leong an oil trading company. Auditor: Deloitte which stands by the air auditor though there are discrepancies of upwards of US$4 billion. The extent of the financial problems at Hin Leong Trading only became clear to its lenders recently. Under pressure to pay down billions of dollars in loans as crude prices crashed and demand slumped because of the coronavirus pandemic, he made a jaw-dropping admission

In a virtual meeting to discuss a possible debt moratorium, the principal owner/energy tycoon(Lim OonKuin)revealed the company, which reported net income of almost US$78.2m in its official accounts for 2019, had not been making profits for years. The company suffered about US$800 million in futures losses over the years but these were not reflected in the financial statements, the principal owner said. He also claimed “In this regard, I had given instructions to the finance department to prepare the accounts without showing the losses and told them that I would be responsible if anything went wrong.”
Then another problem was revealed that oil pledged as collateral for loans had been sold to raise cash. This is what the trading position could be after the owners’ revelations:

Hin Leong Trading’s estimated financial position (US$m)
Liabilities Apr 9 2020 Audited Oct 31 2019
Bank debt 3,850 1,704
Account payable 200 2,349
Equity [undisclosed] 509
Total 4,050 4,562
Accounts receivable 523 2,824
Inventory 141 1,277
Cash 50 461
Total 714 4,562
Difference (3,336)

Source: Hume, N., and Palma, S., Singapore scandal rocks commodity traders and their lenders, Financial Times, 21 x 2020.
Available at:
Accessed: April 2020.

Yet, Deloitte’s still stands by their audited October 2019 accounts. Go figure. This failure may also have a chilling effect on banks’ willingness to lend to all the commodity traders. Singapore has witnessed recently the collapse of Noble Group, Agritrade International and Petro-Diamond Singapore. The banks (Sumitomo, ABN, Society General) are adding their pressure and trying to take-up any security they have over the company’s assets or sales.

Other big recent cases
NMC Health (was FTSE 100. auditors: EY) overstated sales.
Although the details are disputed it clear that sales were overstate and there may have been other frauds. This company engaged in rapid expansion especially in UAE and the Middle East (and less so in the UK). The problem started with a possible takeover approach and then it became clear that there was doubt as to who controlled the largest shareholding. Then Muddy Waters, the short selling hedge fund, in December 2019, talked about debt being understated. An investigation led to the debt pile being US$6.6 million and much higher than previously reported. There may be, so it is alleged, some evidence that assets were overstated and the debt had not been properly authorised by the board – and worse may have been used for non-group assets. There are criminal complaints by NMC’s creditors. Berger Montague are beginning a class action of investors over its securities fraud instigation into NMC. Namely concealing $6.6 million of debt and improper related-party transactions. Bavaguthu Raghuram Shetty, founder and until recently the joint-chairman, claimed that it was a small group of insiders that undertook the alleged fraudulent activities. No doubt the courts will ultimately decide. He fled from UEA to India fearing legal procedures by local banks. That said he has run into similar problems in India and the Central Bank of UAE has frozen his bank accounts and blacklist his firms.

Luckin Coffee:
Lucklin Coffee (China, listed on NASDAQ, auditors: EY) overstated sales – possibly by as much as US$2.2 billion. This case was a cashless Starbucks lookalike operating in China with over 4,000 stores that are small pick-up locations in office buildings or college campuses that serve for online orders’ pickup and delivery. Another of the many tech companies that boasted of sales prowess, through heavily subsidised those sales – like Uber the so called growth-without-profits business model. Luckin now admit that hundreds of millions of dollars of sales had been fabricated. Perhaps an over eager management keen to show success? There may also be some suspicious loans but these are not proven. About 75% of the company’s markets value was wiped off. Several senior management have been suspended and are under investigation. The SEC in the US is also investigating the company.

WeWork’s (IPO, auditors: EY) created esoteric measure of profit which meant little and were misleading. That office for rent model is continuing with increasing financial problems and shareholders who may not want to pour more cash in.

GSX (China, listed on NYSE, auditors: Deloitte) overstated massively revenues causing a shares plunge in the value of shares by 74%. This company is an online tutoring provider headquartered in Beijing. Citron Research, Equal Ocean and Grizzly Research reported negatively on the company.
As well as GSX, one of GSX’s rivals in China, TAL Education, admitted sales fraud.
Chinese streaming company iQiyi was accused by Muddy Waters of inflating both its 2019 revenue and user numbers.

Kasen International Holdings (Listed in Hong Kong, auditors: BDO) an investment company has been accused of illusory investments and transactions between the company and chairman’s family members by the founder of Blue Orca Capital. Ching Lee plunges 91% on the Hong Kong market and shares were suspended after being targeted by short seller Soren Amdahl.

Lookers PLC
Lookers(was FTSE 250, auditor GT) has been Britain’s biggest car retailer by revenue £4.9 billion in 2018. Originally, it was reported that the fraud was less then a £1 million but that would not be material so we think it may be much more serious. The FCA and police are involved and this fraud scandal and the emerging accounting crisis led management to postpone publication of its 2019 accounts for a second time (was due in March, then delayed until June and now not surer when). Now that fraud in one of its division seems to have grown to £4 million and perhaps counting. This was after a second profits warning in November 2019. The Sunday Times reported[1]:

“The original issue of alleged fraud is understood to have concerned falsifying sales data for one of Lookers’ brands, inflating the bonuses of one or more staff members. The police are thought to be involved. It is understood not to be linked with a Financial Conduct Authority inquiry into the way the company administers financing arrangements for customers buying cars on hire purchase.”

Wirecard again (DAX, listed in Germany, Auditor: EY, special auditor: KPMG)
The FT (which led this issue) reported[2]:
The KPMG special audit into Wirecard’s financial statements was delayed twice. Wirecard had confidently predicted the special audit report by KPMG would vindicate its accounting and deliver a final riposte to its sceptics. But that did not happen. Instead, KPMG has not been able to verify whether a series of sales and profits from third parties were genuine. Wirecard’s relationship with these partners was central to this special audit. Basically so it appears is that KPMG met a wall of silence or non-cooperation meaning that sales revenues could not be confirmed or the correctness of any amounts. Wirecard shares plummeted on this news.

EY in trouble in Dubai after firing a whistleblower in alleged money laundering.
The headlines read that the UK high court found EY and its Middle East associate firm embroiled an employee in seriously improper conduct. EY has been ordered to pay $10.8m in compensation to a former partner who blew the whistle on a client in Dubai suspected of laundering money and smuggling gold. This was despite EY denying wrongdoing and robustly defending the case. As Mandy Rice-Davies would say they would say that wouldn’t they?

UK other:
There is an investigation by the FCA into mainstream lending banks were abusing their relationships with clients to demand lucrative roles on equity capital raisings they would never normally be awarded.

Nothing else recently on firms operating in the UK but the above article by the Economist thinks that there will be several.  Hover, the number of firms seeking administration or takeover is growing at an exponential rate and will continue into May and beyond.

Many cases to be added. These include:
Bonmarché, Woodford (again), RSM, KPMG, Goals Soccer Centres, Sports Direct (now Frasers Group), M&C Saatchi (again), SoftBank, EY, HBOS (again), Sirius, Wirecard (again), Galliford Try, Berkeley Homes, Lookers, Capita (again), Cineworld, Debenhams, Barclays (again), JD Sports, Persimmon (again), Metro (again), Elliot Group, and others. These will be added shortly.

Meanwhile the latest news and analysis to the end of 2019 is shown below:
For the latest news about ongoing cases and cases not covered fully within the book such as Arcadia, Patisserie Valerie, Wirecard, Metro Bank, Redcentric and about 40 other cases. These are constantly updated. New developments and cases will be added as they occur and at least monthly.

1 Current cases update 2019 (on the latest cases)
Download above for 40+ of the latest financial scandals and failures
For information about the audit market and accounting firms – including joint audits, ARGA, and an operational split of the Big Four see:
The latest new files of significant length are:
11 Thomas Cook
12 Sports Diirect
Other Downloads
2 CMA and Kingman reports update
3 FRC updates cases
Updates on these cases
4 Assetco
5 Autonomy
6 Barclays Bank update
7 Patisserie Valerie update
8 Steinhoff update
9 Tesco update
10 Wirecard

[1]Lea, R.,Car dealer Lookers hits the brakes on accounts for a second time, Sunday Times, 25 April 2020.
Available at:
Accessed April 2020.

[1]Storbeck, O., and McCrum, D., KPMG special audit into Wirecard runs into second delay, Financial Times, 27 April 2020.
Available at:
Accessed April 2020.

 [i]Business, Who’s lost their trunks? The economic crisis will expose a decade’s worth of corporate fraud, The Economist, 18 April 2020.
Available at:
Accessed: April 2020.