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Watchdog Scrutinizes Cashcloud

NFC - Near field communication, mobile payment
Cashcloud wants to meet Apple when it comes to mobile payments. But it has run into trouble.
  • Why it matters

    Why it matters

    Cashcloud continues to rake in praise, even as financial regulators ask questions about its stock’s peculiar price swings.

  • Facts

    Facts

    • At close of business last week, Cashcloud shares listed at €1.42. Last August they sold for €10 a share.
    • When Cashcloud went public in mid-2015, shareholder Steffen Korbach held almost one-fifth of its stock which shot up by over 150 percent in the following weeks.
    • According to reports, Mr. Korbach sold his 19.92 percent share a couple of weeks ago.
  • Audio

    Audio

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Moritz Hunzinger is the talkative type, typical of someone who worked in public relations before making the leap to chief executive of a fintech startup.

So the 57-year-old head of Cashcloud, developer of a mobile payment app, chatted away like a PR expert when a reporter called him for comment Friday night.

A day earlier German financial regulators had warned of “misleading information” in suspicious recommendations to buy Cashcloud stock, published in emails and stock market letters.

“Cashcloud is not connected in any way with those stock market letters. We neither commissioned those recommendations nor do we wish them. But we also cannot prevent them.”

Moritz Hunzinger,, Cashcloud CEO

BaFin, Germany’s federal financial supervisory authority, said it had “evidence indicating buy recommendations contained false or misleading information, and/or that existing conflicts of interest were wrongfully concealed.”

When contacted for comment, Mr. Hunzinger denied his company was involved.

“Cashcloud is not connected in any way with those stock market letters,” he said. “We neither commissioned those recommendations nor do we wish them. But we also cannot prevent them.”

Mr. Hunzinger went on to explain that he was in Spain at the time, which he claimed was the fastest growing market for his new company. The next morning he was due in Ukraine, where his company’s software team is located.

Mr. Hunzinger’s financial technology startup was also in the news earlier last week. On May 16, for example, the Cashcloud boss had sent out the self-assured slogan that his company was “better than Apple Pay.” Shortly afterward, as if in confirmation, came a report that the startup had once again been showered with prizes for innovation in financial technology.

That sounded like a genuine success story, which is why BaFin’s warning later in the week came as such a surprise.

So what kind of company rakes in honors like Cashcloud does, even as financial regulators question advice that might boost its stock price?

Cashcloud was founded in 2011 in Switzerland, and its main product is a prepaid app to make payments by smartphone.

Its prominent CEO, Mr. Hunzinger, made headlines a decade ago when he ended the political career of former national chairman of the Social Democratic Party, Rudolf Scharping. Mr. Scharping was tripped up over speaking fees paid for by Mr. Hunzinger, then a PR consultant and lobbyist, in a scandal that came to be called the “Hunzinger Affair.”

As far as Cashcloud’s finances are concerned, a major shareholder was 34-year-old Steffen Korbach. Not much is known or has been written about him. He is said to be an investment banker and co-owner of the German car tuning company, Gemballa.

A couple of years ago, Mr. Korbach received a brief mention in the U.S. publication Business Insider for being involved in “the most expensive car crash in history.” According to the magazine, Mr. Korbach’s Pagani Zonda F Clubsport was worth more than $2 million when he lost control and crashed it on a rain-slicked Italian highway.

At any rate, when Cashcloud went public in the middle of last year, Mr. Korbach held almost one-fifth of shares. The stock shot up by over 150 percent in the following weeks – even though, according to the prospectus, the company didn’t even have “sufficient business capital” available.

So why did the price of Cashcloud stocks explode at the time?

One reason might have been stock tips, disseminated through emails and stock market letters, that raved about Cashcloud’s promise. It would seem that unsuspecting small investors acted on the advice and were herded into buying the stock.

Cashcloud shares were particularly pushed, for example, by the website boersennews.de, which is owned by Leipzig-based Internet and travel company Unister. The endorsement was marked as an “advertisement,” but a Unister spokesperson could not say who placed the ad.

At the time, the German stock market, or Deutsche Börse, temporarily discontinued trading the stock.

But even when Cashcloud’s share price lapsed into ruin for some time, the stock would occasionally leap in value. That happened again last week, until BaFin intervened.

On Friday night the stock, which was worth almost €10 a share in August, was listed at €1.42 – for a market value of €17 million, or about $19 million.

According to reports, Mr. Korbach sold his 19.92 percent stake a couple of weeks ago. But he is quoted as saying he “continues to be very close” to Cashcloud.

Mr. Hunzinger, who became chief executive in early January, said roughly €10 million has been invested in the company since 2011. A major part of that, he noted, came from Mr. Korbach and his business partners. Even now, he said, Mr. Korbach is “month for month putting €300,000 to €400,000” into the company.

The principal shareholder of Cashcloud now is SPP Capital investment firm. According to Mr. Hunzinger, it belongs to a business partner of Mr. Korbach.

Financial technology sources say Cashcloud was recently offered for sale. Company head Mr. Hunzinger explained that he is “constantly speaking with decision-makers” and “gladly listens to offers.”

And despite all the uproar over the startup’s stock, he was upbeat about the future.

“If I had the economic means,” he said, “I would make a global company out of Cashcloud.”

 

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