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02/25/2019

03:00 PM

Financial extortion

Wirecard threatened with fresh short-selling attack

By: Daniel Schäfer, Andreas Kröner

Handelsblatt has learned that the German financial services firm received a demand for payment to avoid negative media coverage. Prosecutors are investigating.

obs/Accor Hotellerie Deutschland GmbH

Can I pay for that bribe with plastic?

One week ago, in a radical step, German financial regulator Bafin imposed a short-selling ban on the shares of the digital payments firm Wirecard. The move prompted much speculation about the reasons for the restriction. 

Now, things are getting a little clearer. Handelsblatt has learned that the financial regulator was acting on highly sensitive information from police investigators, received several days before the ban was imposed. This suggested that a recent short-selling attack on Wirecard shares had been carefully planned, including million-euro payments to secure negative press coverage.

Stock plummets: Wirecard hit by report of accounting and contract irregularities in Asia

Stock plummets

Wirecard hit by report of accounting and contract irregularities in Asia

The Financial Times cites documents describing potential fraud and money laundering at the German payments firm.

“On Friday of last week at 7.30 am, we received serious reports from Wirecard that a new shorting attack was planned, and that large sums of money were being offered to influence media reports,” Hildegard Bäumler-Hösl, a Munich public prosecutor told Handelsblatt. Wirecard declined to comment.

 Fake news

An intermediary had apparently attempted to bribe British journalists with a seven-figure sum, while simultaneously approaching Wirecard, offering to prevent negative coverage in return for a similar payment. The details have been incorporated into Munich prosecutors’ wider investigation into possible market manipulation, begun after an initial short-selling attack against the company a few weeks ago.

At that time, the Financial Times reported on suspicions of fraud associated with Wirecard’s Singapore operations. The reports dramatically pushed down the stock of the financial services company, which floated on the Frankfurt exchange 18 years ago and in September joined the DAX index of Germany’s thirty biggest listed companies shortly after becoming more valuable than Deutsche Bank. Within two weeks, Wirecard shares shed over 40 percent, knocking some €10 billion off its market capitalization. 

Bafin’s decision to ban shorting of the company’s stock was clearly influenced by the alleged plans for renewed shorting attacks on Wirecard, along with attempts to influence media reports. “We received the information from public prosecutors,” said a Bafin spokesperson, “It was one element in the decision to ban short sales.” She said there were additional reasons for the ban, which will remain in place until April 18.

Feel-good investing

According to Bafin’s ruling, other aspects included the high level of short positions held in Wirecard shares, and threats to confidence in the German stock market. The regulator was concerned that investor capacity to assess the truth of information about companies could be affected, undermining any basis for accurate pricing on the market.

Bafin did not previously make explicit mention of the planned attacks or of attempts to bribe journalists because the information was a confidential warning from public prosecutors, rather than the result of its own investigations.

The information is no longer confidential. But many puzzling aspects remain. These include the alleged fraud in Singapore, reports of which had been based on a provisional report from a law firm. Wirecard insists that there is no evidence whatsoever for the allegation. The law firm’s final report on the matter is due to be issued in the near future.

Andreas Kröner and Daniel Schäfer cover financial services for Handelsblatt in Frankfurt. To contact the authors: [email protected] and [email protected]

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