The district court in Munich has given the go-ahead for a class action from investors against EY, among others, in conjunction with the insolvency case of Wirecard.
The highest regional court in Bavaria will have to clarify the role of EY in examining Wirecard’s balance sheets that can lead to justifying claims for damages by investors and institutional investors.
German asset management company Deka Investment told IPE that it had taken action to claim damages from Wirecard. The case refers to 11 plaintiffs and claims for damages that are pending, according to the court ruling.
Along with the proceeding, the conditions justifying the claims with regard to the responsibility of auditors on alledged manipulation of Wirecard financial statements are being determined, according to the ruling.
The plaintiff initially filed a lawsuit against Wirecard, then added Markus Braun, the former chief executive officer of Wirecard who is now in jail, and EY to the case.
According to the ruling, Wirecard´s financial statements for the period 2014-2018 are under scrutiny. Both Braun and EY dispute whether the proceeding is admissible.
The public prosecutor in Munich has filed charges against Braun, Wirecard’s former head of accounting and the former managing director of CardSystems Middle East, a Dubai-based subsidiary of Wirecard, according to a statement.
The public prosecutor suspects that the people accused have worked with other parties inside and outside Wirecard for years to drive a rapid growing and extremely successful FinTech company that joined the DAX 30 index, allegedly fabricating highly profitable businesses, especially in Asia.
The consolidated financial statements for the years 2015-2018 were incorrect, allegedly posting revenue from a so-called Third Party Acquirer (TPA) business. The main TPA partners were three companies in Dubai, in the Philippines and in Singapore, according to the prosecutor.
The proceeds were included in Wirecard’s balance sheet as either receivables from the TPA partners or as deposits in escrow accounts in Singapore, but did not exist, it added.
By the end of 2015 at the latest, it was clear to the people against whom the allegations had been made that Wirecard was only making losses that would ultimately lead to insolvency.
Wirecard filed for insolvency after €1.9bn were missing from its balance sheet. The insolvency, which caused a shock at political level, led to the supervisory authority BaFin being accused of failing to oversee activities at Wirecard.
As a result, now Chancellor Olaf Scholz, who was Germany’s finance minister at the time, appointed Mark Branson, CEO of the Swiss Financial Market Supervisory Authority FINMA, as the new president for BaFin, which has been going through a reform process itself.