BaFin employee suspended over Wirecard insider dealing allegations
German financial watchdog files criminal complaint against staff member
German financial watchdog BaFin has filed a criminal complaint against one of its employees who is suspected of having used insider information when trading Wirecard shares last summer, just before the German payments company disclosed that €1.9bn in corporate cash was missing from its accounts.
In a statement published on Thursday morning, the regulator said the employee had been suspended with immediate effect and that it had taken disciplinary steps against them.
“The employee bought structured financial products linked to Wirecard on June 17 2020,” BaFin said, adding that Wirecard on the subsequent day disclosed that auditor EY could not verify €1.9bn in corporate cash. Shares in Wirecard lost more than 60 per cent within a day.
BaFin has long been under fire for its mishandling of early warning signals of misconduct at Wirecard.
Gerhard Schick, head of consumer lobby group Finance Watch Germany, on Thursday called for the dismissal of BaFin president Felix Hufeld and his deputy Elisabeth Roegele, adding that the watchdog started to crack down on potential insider trading by its staff only after intense public pressure had built up.
After short sellers in 2016 published fraud and money-laundering allegations, the regulator discussed the “homogeneous cultural background” of investors betting against the company, noting they were “mainly Israeli and British citizens”.
In 2019, it temporarily protected Wirecard from short sellers, brushing aside Bundesbank concerns and filing a criminal complaint against the Financial Times journalists who reported the fraud allegations disclosed by whistleblowers.
Mr Hufeld suggested Wirecard might be the victim of an elaborate plot by short sellers even after the company discovered that €1.9bn of its stated cash was missing, according to three people briefed on the matter and a document seen by the FT.
BaFin said on Thursday that the potential insider trading by its employee was discovered during a special audit into its staff’s share transactions, adding that it filed a criminal complaint against the employee with criminal prosecutors in Stuttgart on January 27.
BaFin in October banned employees from trading shares and other securities in companies that it oversees. An internal investigation showed four employees in 2020 had been in breach of disclosure rules by reporting trades in Wirecard securities with two to eight-month delays.
One of the employees left BaFin at the end of November after his contract was terminated. Three other BaFin employees are being probed over similar allegations.
In December, the head of the German audit watchdog Apas was suspended with immediate effect after admitting trading shares in Wirecard while conducting a probe into the company’s auditor.