The ailments of Wirecard & the systemic erosion of the rule of law

Digital veneering and the failure of established systems

How Wirecard failed and why (almost) nobody came up with it.

“The voice of reason is soft.” (Siegmund Freud)


Theodore Holmes Nelsons’ computer lib

Already in the legendary book classic “Computerlib/Dream Machines” 1 in 1974 (!) Theodor Holmes Nelson dealt intensively with the question of how best to pay on the Internet. Nelson was less concerned with paying for physical goods: It became apparent early on that books and pages were slowly becoming “old school” and had to be replaced by “more atomic” information units 2. He was therefore more concerned with how best to handle transactions for smaller, atomic information units.

In Computerlib/Dream Machine (1974) Nelson was more concerned with how best to exchange atomic information units.

Since it was obviously also about copyright issues, he developed a system that interweaves copyright and payment with micropayments in a sophisticated way. This was intended to encourage web users to put content online and to enable users to read even small snippets without tiresome payment procedures. Unfortunately, the system was so well thought out that it could never be implemented…

Creative Commons

The legal question was later addressed by Lawrence Lessig with his Creative Commons Licenses.

Lessig wanted to protect creative people from unjustified license claims of third parties, which still make sampling of music pieces difficult today. An intellectual and technical masterpiece of the Harvard professor, which of course was deliberately limited to the copyright release of content and left out payment problems.

In the early 2000s, a number of new providers and start-ups took up the question of how best conduct payments on the Internet. These often received a certain amount of “start-up financing” for pornography and gaming as a result of increasing demand from the “dirty corner”.

Sooner or later, however, most of these providers gave up again: either because they could not master the balancing act between constantly increasing security requirements and simple integration in web shops (which is still a topic today, compare the current discussion about Zoom, because they were unwieldy to use (additional credit account required) or because the payment method used became technically obsolete – like paying via a charged landline number (!).

Trust and Usability

Trust and ease of use are two key factors for the success of such systems. Bitcoin and in their wake digital coins took a dynamic approach in recent years to finally solve the very problem Holmes had already addressed (simple payment of small amounts).

Its developer, a person who appeared under the pseudonym Satoshi Hashimoto 3, certainly knew that technology can never replace human trust when he (?) wrote (emphasis added by the author):

We have proposed a system for electronic transactions without relying on trust3.

He solved the do-ut-des problem of jurisprudence – “Who pulls the revolver first” / Which transaction first: goods or money? – quite awkwardly with an irreversibility: So no party can withdraw!

Since a reversal is not intended and deliberately difficult to reverse (“computationally impractical to reverse” 3), Hashimoto decoupled the factual-technical processes from all legal contexts and created a paradise for institutionalized illegal dark web activities.

He solved the continuity problem – why someone should run such a service if no institution is intended for it – with a carrot, behind which he stretched the operators so that they continuously create new Bitcoins out of greed and the system automatically continues to run – biting away like an untrained killer dog and technically can no longer be stopped, even if humans want it to.

Hashimoto wanted to replace the trust problem with this rigid technology. The Bitcoin and Blockchain creating trust, is a modern fairy tale, which has been unswervingly and uncorrectedly circulating in public opinion for years and is unrestrainedly kept alive by digitally blinded protagonists 4. Hashimoto never wanted to deliver trust through technology, he wanted to replace it, because him was clear:

(Blockchain) technology can't create trust between people.

Since the technology is impractical, uncontrollable, energy-wasting and susceptible to fraud by hackers and scammers (Ponzi schemes, pyramid schemes), and since the stock price is driven only by the misguided and unrealistic enthusiasm of investors, the hype fortunately slowly subsides.

Paypal and Wirecard

Paypal, on the other hand, survived and developed very well and was built by Elon Musk. Founded in 1998, Musk's sale to eBay in 2002 gave him the bag money he needed to build his other futuristic techno companies (Boring, Tesla, SpaceX).

Wirecard also developed magnificently. Coming from a dirty corner, it actually seemed as if the Austrian Markus Braun as a former KPMG consultant could lead it out of this corner.

He developed Wirecard into a respectable group of companies with an (alleged) balance sheet total of 5.9 billion euros in 2018. Finally, he even entered the Dax index with Wirecard, simply by purchasing a shell company, of course. Right up to the end, Wirecard affirmed its innocence 5.

Dan McCrum of the Financial Times, however, after information had been slipped to him by wistleblowers, had pointed out irregularities at Wirecard as early as the beginning of 2019 – whereupon Wirecard took legal action against him and in Germany these “attacks” were partly disparaged as a reflex of envy of a solid global German player. A special audit by KPMG, however, provided only a partial warning, until in June 2020, the shortfall of 1.9 billion euros became apparent and culminated in the temporary arrest of Markus Braun and finally in the insolvency of Wirecard.

Wirecard as false hope

While the obsolescence of traditional business models such as that of Lufthansa is obvious, Wirecard was for many years the longed-for digital rising star. Finally a company from Germany that could potentially take on Google, Amazon and Co! A high flying dream currently actively impelled by the attempt to develop an European Cloud solution6.

Both the BAFIN as the German supervisory authority and EY, however, failed to correctly interpret the warning signs that had become apparent to journalists. Their analytics were obviously, to use Ashby's Law, subcomplex: they did not have the tools and the necessary handling to get to grips with the machinations at Wirecard. EY justified itself, although the Financial Times had previously consistently expressed well-founded scepticism that this was a deliberate scam that could not be remedied.

Causal research

The following reasons can be identified for Wirecard's inclusion in the Dax and its remaining there despite obvious risk indications:

Digitalism (digital blindness)

Digitisation is often seen as a release from human limitations. What is overlooked is that digitization only offers syntactic mechanisms that are detached from contextual references (pragmatics) and interpretations of content (semantics) – and thus from (human) reality.

In concrete terms, this means that the enormous scalability of digital business models without further marginal costs is blindly accepted and praised 7, although on closer inspection these usually become very relative. For example, most of Silicon Valley's flagship companies – such as Uber or Airbnb – have so far been supported by investors and have made no or very little profit.

Thus, there is a lack of concrete key figures to assess the trustworthiness of such companies on a rational basis. While a conventional manufacturing company is clearly ranked by analysts according to its performance, most observers of digital companies lack reliable key figures. Legal- or Fintech is understood as a projection surface for unlimited growth, without any reference to reality. Only a few analysts (such as Ben Thompson) are not impressed by this and are even able to evaluate and classify digital business models in a sober way.

Undercomplexity (lack of analytics)

Even an*e expert*r is easily at the mercy of targeted manipulation. Especially since the control is limited to accounting and financial or economic aspects and the IT and data are only formally viewed from outside. Whether the number of transactions, the IT and the algorithms used are actually in a resilient relationship to the alleged economic results is not checked at all. A deeper technical examination of IT, the algorithms and the data structures and data streams is more than overdue 8.

However, neither the test system nor the persons involved are even to a certain extent capable of doing this…

Systemic erosion

Finally, the problems are the expression of a deeper systemic erosion that we can diagnose today. The stable social regulatory systems we know of have increasingly lost their importance. Until relatively recently, the legal system claimed to be a closed effective system that functions deterministically and predictably according to hierarchically ordered rules. The established systems sociologist Niklas Luhmann spoke of legal norms as counterfactually stabilized behavioral expectations. With Donald Trump's erratic behaviour and the progressive systematic political instrumentalisation of the law by autocrats, this has the effect of a distant past.

In reality, even in established democratic states, new social institutions such as compliance, mediation, governance, arbitration, offshoring, settlements, as well as digital developments such as Blockchain, artificial intelligence and fin- as well as legaltech have deprived human spheres of action of the law and thus weakened it permanently. Together with cost-cutting measures and eGovernment efforts – as cuts in human commitment and presence – the law has become only a narrow shadow of itself.

Since a company like EY earns (a lot!) money with test certificates, they lack the systemic difference from which they can make a neutral assessment. It is significant that justified doubts have been raised from the outside by the press and a journalist and not by the private sector review body responsible for this. Even if there was an agreed fraud, as EY claims, it was not EY but a journalist who uncovered it!

Analytical intelligence

That's bad enough. It gets worse. The official review body, the BAFIN, seems to be non-existent in this context. It does not seem to be able to counter even the slightest analytical test force to these complex processes, which are already normal in the normal operation of financial organisations in a globalised context. The fact that this is a matter of digital fintech and possibly malicious manipulation apparently makes the BAFIN completely subcomplex in order to get even the slightest foot on the “ground” to be examined.

However, according to Ashby's Law9, an increased variety is required for the system to be controlled or tested, otherwise it cannot effectively test the system. Today's testing organizations are thus hopelessly inferior to the testing requirements, they are simply too under-complex and shortened in view of dynamic situational and local solution options. There is a fundamental problem.

In addition, the pure balance sheet audit lacks any insight into the technical processes: it is blind in one eye.

Therefore, more natural intelligence and the disclosure of algorithms are needed to deal with Fintech and other digital smoke grenades and to regain regulatory ground contact.

Translated with (free version)


While Holmes’ vision was too complex to be implemented, Braun's was too simple to be serious. Holmes had recognized this limitation, Musk had sold Paypal very quickly, and Braun had exploited the inability of the regulators for too long. We can be curious to see how the history of easy payment on the internet will develop.


  1. Nelson, Theodor Holmes (1974): Computer Lib/Dream Machines ↩︎

  2. Horn, Robert E. (1969): Information Mapping for Learning and Reference [PDF], derselbe: Mapping Hypertext: The Analysis, Organization, and Display of Knowledge for the Next Generation of On-Line Text and Graphics (1990) ↩︎

  3. Hashimoto, Satoshi (2008): Bitcoin: A Peer-to-Peer Electronic Cash System ↩︎

  4. Z. B. Voshmgir, Shermin (2017), WU Wien: «Die Blockchain ist ein Protokoll, das Vertrauen dezentralisiert», in: Die Sache mit dem Vertrauen ↩︎

  5. Wirecard (21.04.2020): Erklärung zur unternehmerischen Verantwortung ↩︎

  6. Claburn, Thomas (2020): Franco-German cloud framework floated to protect European's data from foreign tech firms slurpage ↩︎

  7. Rebhorn, Daniel (2019): Digitalismus ↩︎

  8. Mayer-Schönberger, Viktor (2018): Wer den großen Mehrwert erwirtschaftet, muss sich auch gesellschaftlicher Verantwortung stellen. ↩︎

  9. Ashby, W. Ross (1956): An introduction to Cybernetics. Wiley, New York. ↩︎