MUNICH â€" Over a year ago, an anonymous source contacted Süddeutsche Zeitung (SZ) with the following exchange:
Hello. This is John Doe. Interested in data?
SZ: We're very interested.
JD: There are a couple of conditions. My life is in danger. We will only chat over encrypted files. No meeting, ever. The choice of stories is obviously up to you.
SZ: Why are you doing this?
JD: I want to make these crimes public.
SZ: How much data are we talking about?
JD: More than anything you have ever seen.
The encrypted internal documents were from Mossack Fonseca, a Panamanian law firm that sells anonymous offshore companies around the world. These shell companies enable their owners to cover up their business dealings, no matter how shady.
In the months that followed, the number of documents continued to grow far beyond the original leak. Ultimately, SZ acquired about 2.6 terabytes of data, making the leak the biggest that journalists had ever worked with. The source wanted neither financial compensation nor anything else in return, apart from a few security measures.
The data provides rare insights into a world that can only exist in the shadows. It proves how a global industry led by major banks, legal firms and asset management companies secretly manages the estates of the world's rich and famous: from politicians, FIFA officials, fraudsters and drug smugglers, to celebrities and professional athletes.
A group effort
The Panama Papers include approximately 11.5 million documents â€" more than the combined total of the WikiLeaks Cablegate, Offshore Leaks, Lux Leaks and Swiss Leaks. The data primarily comprises e-mails, PDF files, photo files and excerpts of an internal Mossack Fonseca database. It covers a period spanning from the 1970s to the spring of 2016.
Moreover, the journalists crosschecked a large number of documents, including passport copies. About two years ago, a whistleblower had already sold internal Mossack Fonseca data to the German authorities, but the data set was much older and smaller in scope: While it addressed a few hundred offshore companies, the Panama Papers provide data on some 214,000 companies. In the wake of the data purchase, investigators searched the homes and offices of about 100 people last year. The Commerzbank was also raided. As a consequence of their business dealings with Mossack Fonseca, Commerzbank, HSH Nordbank and Hypovereinsbank agreed to pay fines of around 20 million euros, respectively. Since then, other countries have also acquired data from the initial smaller leak, among them the United States, the UK and Iceland.
The leaked data is structured as follows: Mossack Fonseca created a folder for each shell firm. Each folder contains e-mails, contracts, transcripts and scanned documents. In some instances, there are several thousand pages of documentation. First, the data had to be systematically indexed to make searching through this sea of information possible. To this end, Süddeutsche Zeitung used Nuix, the same program that international investigators use. Süddeutsche Zeitung and ICIJ uploaded millions of documents onto high-performance computers. They applied optical character recognition (OCR) to transform data into machine-readable and easy-to-search files. The process turned images â€" such as scanned IDs and signed contracts â€" into searchable text. This was an important step: It enabled journalists to comb through as large a portion of the leak as possible using a simple search mask similar to Google.
The journalists compiled lists of important politicians, international criminals and well-known professional athletes, among others. The digital processing made it possible to then search the leak for the names on these lists. The "party donations scandal" list contained 130 names, and the UN sanctions list more than 600. In just a few minutes, the powerful search algorithm compared the lists with the 11.5 million documents.
For each name found, a detailed research process was initiated that posed the following questions: What is this person's role in the network of companies? Where does the money come from? Where is it going? Is this structure legal?
Generally speaking, owning an offshore company is not illegal in itself. In fact, establishing an offshore company can be seen as a logical step for a broad range of business transactions. But a look through the Panama Papers very quickly reveals that concealing the identities of the true company owners was the primary aim in the vast majority of cases. From the outset, the journalists had their work cut out for them. The providers of offshore companies â€" among them banks, lawyers and investment advisors â€" often keep their clients' names secret and use proxies. In turn, the proxies' tracks then lead to heads of state, important officials and millionaires. Over the course of the international project, journalists cooperated with one another to investigate thousands of leads: They examined evidence, studied contracts and spoke with experts.
Among others, Mossack Fonsecas' clients include criminals and members of various Mafia groups. The documents also expose bribery scandals and corrupt heads of state and governments. The alleged offshore companies of 12 current and former heads of state make up one of the most spectacular parts of the leak, as do the links to other leaders, and to their families, closest advisors and friends. The Panamanian law firm also counts almost 200 other politicians from around the globe among its clients, including a number of ministers.
The company at the center of all these stories is Mossack Fonseca, a Panamanian provider of offshore companies with dozens of offices all over the world. It sells its shell firms in cities such as Zurich, London and Hong Kong â€" in some instances at bargain prices. Clients can buy an anonymous company for as little as $1,000. But at this price it is just an empty shell. For an extra fee, Mossack Fonseca provides a sham director and, if desired, conceals the company's true shareholder. The result is an offshore company whose true purpose and ownership structure is indecipherable from the outside. Mossack Fonseca has founded, sold and managed thousands of companies. The documents provide a detailed view of how Mossack Fonseca routinely agrees to engage in business activities that potentially violate sanctions, in addition to aiding and abetting tax evasion and money laundering.
About Süddeutsche Zeitung
Headquartered in Munich, Süddeutsche Zeitung is one of Germany's leading newspapers. SZ has a total readership of 4.4 million for its print and online media. Its investigative journalism team counts five people, three of whom are members of the International Consortium of Investigative Journalists (ICIJ). Süddeutsche Zeitung has won a number of prestigious awards for its research work, and its team has cooperated with other media organizations on a number of projects, including Offshore Leaks, Swiss Leaks and Lux Leaks, which ICIJ coordinated. At the beginning of 2015, an anonymous source began sending Süddeutsche Zeitung data from Mossack Fonseca, a provider of offshore companies. This marked the beginning of the Panama Papers project.
*Süddeutsche Zeitung, in cooperation with the International Consortium for Investigative Journalists, sent Mossack Fonseca several written requests for comment. In response, the law firm sent two general statements, which can be viewed here.
It is today a proven fraud, nailed by the French stock market watchdog: Air Next resorted to a full range of dubious practices to raise money for a blockchain-powered e-commerce app. But the simplest of errors exposed the scam and limited the damage to investors. A cautionary tale for the crypto economy.
PARIS — Air Next promised to use blockchain technology to revolutionize passenger transport. Should we have read something into its name? In fact, the company was talking a lot of hot air from the start. Air Next turned out to be a scam, with a fake website, false identities, fake criminal records, counterfeited bank certificates, aggressive marketing … real crooks. Thirty-five employees recruited over the summer ranked among its victims, not to mention the few investors who put money in the business.
Maud (not her real name) had always dreamed of working in a start-up. In July, she spotted an ad on Linkedin and was interviewed by videoconference — hardly unusual in the era of COVID and teleworking. She was hired very quickly and signed a permanent work contract. She resigned from her old job, happy to get started on a new adventure.
Others like Maud fell for the bait. At least ten senior managers, coming from major airlines, airports, large French and American corporations, a former police officer … all firmly believed in this project. Some quit their jobs to join; some French expats even made their way back to France.
Share capital of one billion
The story began last February, when Air Next registered with the Paris Commercial Court. The new company stated it was developing an application that would allow the purchase of airline tickets by using cryptocurrency, at unbeatable prices and with an automatic guarantee in case of cancellation or delay, via a "smart contract" system (a computer protocol that facilitates, verifies and oversees the handling of a contract).
The firm declared a share capital of one billion euros, with offices under construction at 50, Avenue des Champs Elysées, and a president, Philippe Vincent ... which was probably a usurped identity.
Last summer, Air Next started recruiting. The company also wanted to raise money to have the assets on hand to allow passenger compensation. It organized a fundraiser using an ICO, or "Initial Coin Offering", via the issuance of digital tokens, transacted in cryptocurrencies through the blockchain.
While nothing obliged him to do so, the company owner went as far as setting up a file with the AMF, France's stock market regulator which oversees this type of transaction. Seeking the market regulator stamp is optional, but when issued, it gives guarantees to those buying tokens.
The infamous typo that brought the Air Next scam down
Raising Initial Coin Offering
Then, on Sept. 30, the AMF issued an alert, by way of a press release, on the risks of fraud associated with the ICO, as it suspected some documents to be forgeries. A few hours before that, Air Next had just brought forward by several days the date of its tokens pre-sale.
For employees of the new company, it was a brutal wake-up call. They quickly understood that they had been duped, that they'd bet on the proverbial house of cards. On the investor side, the CEO didn't get beyond an initial fundraising of 150,000 euros. He was hoping to raise millions, but despite his failure, he didn't lose confidence. Challenged by one of his employees on Telegram, he admitted that "many documents provided were false", that "an error cost the life of this project."
What was the "error" he was referring to? A typo in the name of the would-be bank backing the startup. A very small one, at the bottom of the page of the false bank certificate, where the name "Edmond de Rothschild" is misspelled "Edemond".
Before the AMF's public alert, websites specializing in crypto-assets had already noted certain inconsistencies. The company had declared a share capital of 1 billion euros, which is an enormous amount. Air Next's CEO also boasted about having discovered bitcoin at a time when only a few geeks knew about cryptocurrency.
Employees and investors filed a complaint. Failing to find the general manager, Julien Leclerc — which might also be a fake name — they started looking for other culprits. They believe that if the Paris Commercial Court hadn't registered the company, no one would have been defrauded.
Beyond the handful of victims, this case is a plea for the implementation of more secure procedures, in an increasingly digital world, particularly following the pandemic. The much touted ICO market is itself a victim, and may find it hard to recover.
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