CHENNAI: A recent order issued by the Enforcement Directorate’s adjudication authority in Chennai has brought out a TN firm’s crucial link to the scandal that led to Germany’s biggest Fintech firm ‘Wirecard’ becoming insolvent after an expose by London-based Financial Times. The alleged crime spawned a book and a Netflix documentary titled "Skandal! Bringing Down Wirecard".
In the October 30 order, the ED authority said that Wirecard had jacked up the price it paid in 2016 to buy Chennai-based Fintech firm Hermes I Tickets Pvt Ltd (HITPL) from Rs 275 crore to Rs 2,400 crore by routing the transaction through a Mauritius-based entity Emerging Markets Investment Fund (EMIF). The agency said the transaction was a "pre-planned insider agreement to divert the differential sale proceeds" as HITPL was not worth the valuation.
The Financial Times in December 2019 had questioned if the transaction was part of a giant fraud to inflate Wirecard's sales and profits. The German firm eventually filed for insolvency in June 2020 revealing that 1.9 billion Euros had gone missing from its accounts.
ED's order also indicates that the sellers of HITPL had met Jan Marsalek, the disgraced former Chief Operating Officer (COO) of Wirecard who was later declared a fugitive and suspected Russian spy operative, multiple times during the course of the deal.
In its investigation launched under Foreign Exchange Management Act (FEMA), ED found that HITPL was sold for Rs 275 crore in September 2015 to EMIF which later sold it to Wirecard for Rs 2,400 crore in March 2016. HITPL's owners, brothers Ramu Ramasamy and Palaniyappan Ramasamy, their family and a firm owned by them received Rs 195 crore as offshore payments in UAE-based companies which were owned by Ramasamy brothers' fathers-in-law. ED says that these companies, VR Payments and NSC Consulting were specifically created to receive these under-the-carpet payments disguised as fee.
The agency said that after HITPL was sold to EMIF, its business was shifted from "travel type agency" to payments business. The 900% jump (from Rs 275 crore to Rs 2,400 crore) in the company's valuation after change in nature of business indicated a pre-planned insider agreement to divert the differential sale proceeds, the ED order said.
Citing evidence based on documents seized by the ED, the adjudicating authority said that Ramu and Palaniyappan were well aware that the actual buyer of HITPL was Wirecard. The brothers had also travelled to Germany in November/December 2016 to meet Marsalek and discuss the final settlement.
In its order, ED imposed a penalty of Rs 566.5 crore on the brothers, their families, and the firm GI Retail Pvt Ltd and confiscated their properties worth Rs 195 crore.