Germany’s financial watchdog BaFin does not have to pay damages to shareholders who suffered financial losses from the downfall of payments group Wirecard, a court in Frankfurt has ruled.
Investors lost huge sums when the Munich-based company, once valued at €24bn on the German stock market, filed for insolvency in 2020 after disclosing that €1.9bn of corporate cash and half of its revenue were fake.
BaFin in 2019 banned short selling of Wirecard stock and filed criminal complaints against Financial Times journalists and investors who had raised allegations of accounting fraud. The watchdog’s president Felix Hufeld and his deputy Elisabeth Roegele were eventually ousted over the scandal.
Some shareholders have taken BaFin, Wirecard’s auditor EY and the company’s administrator to court in a quest to recover some of their money.
Frankfurt district court on Wednesday dismissed four civil lawsuits from former Wirecard shareholders, who were seeking between €3,000 and €60,000 in compensation from the German government. They alleged BaFin had gravely violated its legal duties with regard to Wirecard.
The investors accused BaFin of not stopping market manipulation by Wirecard, failing to investigate evidence of illegal conduct by the company and failing to inform the public properly.
The lawsuits were dismissed, with the court arguing that under German law, BaFin explicitly works for the wider public interest rather than that of individual investors.
“A potential violation of legal duties hence cannot result in a duty to compensate an investor who suffered losses,” the presiding judge was cited as saying in a court statement, adding that third parties were not legally protected from the watchdog’s mistakes.
Criminal prosecutors in Frankfurt are assessing whether BaFin employees obstructed justice by not properly investigating fraud warnings.
“A decision on whether an investigation against named BaFin employees has to be opened has not yet been taken,” the prosecutors’ office told the FT on Wednesday.
BaFin declined to comment.
The Frankfurt court’s ruling comes a week after the first charges against an individual over the multibillion-euro Wirecard fraud.
Munich prosecutors last Thursday said they had charged a former business associate of ex-Wirecard executive Jan Marsalek with 26 counts of money laundering.