Hire car firm Dexcar suspected of fraud

State prosecutors in Germany are investigating the Essen-based car rental company Dexcar over allegations that it ran an illegal Ponzi scheme, defrauding customers across Europe, German media reported Monday.

The scheme could be the largest ever run by a rental car firm in Europe, according to the reports.

The allegations

According to information gathered by the German daily Süddeutsche Zeitung (SZ) and broadcaster WDR:

• Dexcar is suspected of having cheated several tens of thousands of customers across Europe.
• The company promised customers they would drive a new car for 24 months for a relatively small down payment.
• Many customers have waited for years for vehicles they have already paid for.
• Of 40,000 cars ordered, only 500 have been delivered.

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Impossible calculation

Austrian consumer advocate Paul Rusching, who is familiar with the case, was cited by SZ and WDR as saying the system was "mathematically completely impossible, let alone financially." Using information from a Dexcar brochure as a basis, he calculated "that a rental car would cost the driver three cents per day," which was not financially viable. He said he suspected an illegal Ponzi scheme.

Read more: Cum-ex tax fraud: German police carry out raids in four states 

What does the company say?

Dexcar founder and manager Mario Gai has denied the allegations, according to SZ and WDR, saying his firm is the target of a defamation campaign. The reports say the company has vacated its Essen premises and is now operating from Belarus as a mainly online service.

What is happening with investigations?

In Germany, state prosecutors from the western city of Bochum who are specialized in economic crime are investigating the company over the allegations. SZ and WDR say that investigations in Austria and Italy are also underway and that the anti-trust authority in Italy has also imposed a €400,000 fine on Dexcar.

What is a Ponzi scheme?

A Ponzi scheme is a form of fraud when earlier investors in a business are paid profits using funds from later investors while under the impression that those profits have been generated by product sales or other means. The scheme is named after Charles Ponzi, an Italian con artist who used the technique in the USA and Canada in the 1920s.Each evening at 1830 UTC, DW's editors send out a selection of the day's hard news and quality feature journalism. You can sign up to receive it directly here.