Wirecard Aided Online Marijuana Sales, Prosecutors Allege

Wirecard AG and its fugitive former No. 2 executive played a key role in an alleged scheme to trick banks into processing marijuana sales, according to evidence and testimony at the New York trial of two businessmen charged with orchestrating the plan.

Federal prosecutors in Manhattan say Wirecard was one of several European banks that opened fraudulent accounts to disguise around $160 million in marijuana purchases made through Eaze Technologies Inc., a California-based marijuana-delivery service. During a trial this month, witnesses have testified that Wirecard’s former chief operating officer, Jan Marsalek, was deeply involved in the alleged scheme.

Mr. Marsalek, 41 years old, is the subject of an international manhunt after German authorities charged him with securities violations and fraud in connection with the demise of Wirecard. Once one of Europe’s most promising technology companies, Wirecard is in bankruptcy following allegations of accounting fraud that include a fictitious $2 billion on its balance sheet. It is the subject of investigations in multiple countries including Germany and the Philippines, and several of its former executives face charges.

Wirecard and Mr. Marsalek are among some 140 uncharged co-conspirators in the Eaze case, court filings show. The Federal Bureau of Investigation examined Wirecard’s role, The Wall Street Journal reported last year.

A bankruptcy administrator for Wirecard didn’t respond to a request for comment. A lawyer for Mr. Marsalek declined to comment.

The two men on trial—California businessman Hamid “Ray” Akhavan and German e-commerce consultant Ruben Weigand —were arrested in March 2020. Both men have pleaded not guilty to bank-fraud conspiracy. The jury began its deliberations Tuesday morning.

The New York trial has highlighted Wirecard’s former role at the heart of the global consumer-payments infrastructure. Eaze, in its efforts to open its business to credit cards for online sales, was drawn into the underbelly of European finance, where a network of bank insiders, payment-processing companies and former credit-card executives help move hundreds of millions of dollars in high-risk industries.

U.S. banks and credit-card companies have policies against engaging in the marijuana business. Lawyers for Messrs. Akhavan and Weigand have argued at trial that U.S. banks and credit-card companies knowingly turned a blind eye to marijuana transactions because they were profitable.

The lawyers have also sought to cast doubt on the government’s theory that Messrs. Weigand and Akhavan were central players in the alleged scheme.

Eaze has cooperated with the investigation; its former CEO pleaded guilty to bank-fraud conspiracy and testified at trial. Through its lawyers, the company declined to comment.

Wirecard’s alleged role was laid out primarily through the trial testimony of Oliver Hargreaves, a U.K. payment-processing executive who said he facilitated the alleged Eaze scheme alongside Messrs. Weigand and Akhavan. Mr. Hargreaves testified that he began secretly cooperating with federal prosecutors in September 2018, after he was arrested in New York in connection with an extortion scheme, unrelated to Eaze, in which he paid a former British special-forces operative to chase down a $30 million debt for a business associate.

He ultimately pleaded guilty to attempted extortion, money-laundering and bank fraud conspiracy. A lawyer for Mr. Hargreaves didn’t respond to requests for comment.

Mr. Hargreaves testified that he got involved in Eaze’s credit-card efforts around 2017, while he was working for a Malta-based payment processing company that helped sectors like pornography and gambling.

Mr. Hargreaves and his team specialized in creating seemingly legitimate websites for shell companies, including, he said, by hiring a company that paid a roomful of people to click on sites to simulate traffic. He courted European bank executives who would be willing to guide gray-market transactions, Mr. Hargreaves testified.

Mr. Hargreaves wanted to work with Mr. Akhavan on his “adult business”—what Mr. Hargreaves understood to be pornography websites he ran—and on Eaze, which had just taken on Mr. Akhavan as a consultant, according to prosecution witnesses and court filings.

By Rebecca Davis O’Brien, The Wall Street Journal, 23 March 2021

Read more at The Wall Street Journal

Source: riskscreen.com