BaFin was sued by Wirecard AG investors who say the regulator turned a blind eye widespread evidence of an accounting scandal that led to the company’s collapse. Picture: Reuters/Michael Dalder
BaFin was sued by Wirecard AG investors who say the regulator turned a blind eye widespread evidence of an accounting scandal that led to the company’s collapse. Picture: Reuters/Michael Dalder

Wirecard investors sue Bafin over failure to spot scandal

By Bloomberg Time of article published Jul 24, 2020

Share this article:

By Karin Matussek

INTERNATIONAL - Germany’s BaFin was sued by Wirecard AG investors who say the regulator turned a blind eye widespread evidence of an accounting scandal that led to the company’s collapse.

Lawyer Andreas Tilp, who filed the suit in Frankfurt, said the regulator should have been aware of the financial problems engulfing the payments processor early last year.

Prosecutors arrested former Wirecard Chief Executive Officer Markus Braun a second time this week over allegations the company covered up massive losses by inflating the balance sheet with fake assets. Regulators and prosecutors have been criticized for ignoring media reports about the company’s financial problems for more than a year.

“BaFin grossly neglected its duties and powers by refusing to investigate Wirecard AG for market manipulation, while taking biased action against journalists and short sellers,” Tilp said in a statement Friday. If Bafin had “properly investigated the matter,” any wrongdoing would have come to light earlier, he said.

Bafin questioned whether the lawsuit was legal, saying that the agency works on behalf of the public interest rather than investors. A spokeswoman also said that the regulator acted on every indication of wrongdoing at Wirecard.

The company filed for bankruptcy in June after acknowledging that 1.9 billion euros ($2.2 billion)it had listed as assets probably didn’t exist. Wirecard admitted that previous descriptions of its business with third parties were “not correct” after pulling its financial results for 2019 and the first quarter of 2020.

Tilp has already filed a suit against Wirecard and later added its longtime auditor Ernst & Young to the case.

EY is struggling to explain why it signed off on Wirecard’s books for years without flagging any issues. The payment processor’s demise was finally triggered in June when the accounting firm made a u-turn and refused to sign off on the company’s annual report.

BLOOMBERG

Share this article: