Germany’s top asset management company takes Wirecard administrators to court for losses

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Wirecard AG update

A former chief shareholder of Wirecard is seeking damages for the failure of the payment group in a landmark lawsuit that threatens compensation that bondholders and banks are also seeking.

The third largest asset management company in Germany, United Investment, has filed a lawsuit in Munich against the manager of Wirecard, who has been selling the remaining assets of the failed payment group in the past year.

The asset management company stated that when Wirecard filed for bankruptcy in June 2020, it suffered a loss of 243 million euros. Before being exposed, Wirecard was hailed as a rare technological success in Germany. At its peak in 2018, it was worth more than 24 billion euros, replacing Commerzbank in the country’s blue chip Dax index.

The lawsuit cited more than 70 press releases and company statements issued by Wirecard between 2014 and 2020, which Union described as misleading and fraudulent.

“our client [Union] Quinn Emanuel’s lawyer Nadine Herrmann stated that Wirecard’s fraudulent and misleading statements induced them to purchase these securities, adding that in bankruptcy proceedings, shareholder claims should be treated the same as other creditors.

According to German law, the claims of equity holders in bankruptcy proceedings are usually ranked last and can only be resolved after other creditors are paid.

“For us, the consequences [of that] There will be no compensation at all,” a Union spokesperson said, adding that legal action was taken out of the need to act “in the best interests of our customers.”

If successful, the lawsuit will hit the banks and bondholders who have loaned Wirecard more than 3 billion euros, and will be forced to share any expenses of the administrator.

According to a report seen by the Financial Times, creditors, shareholders and other aggrieved parties have filed a claim of more than 14 billion euros against administrator Michael Jaffé.

So far, Jaffé and his team have generated approximately 600 million euros in proceeds through the sale of Wirecard’s assets to Spanish bank Santander and the sale of Wirecard North America to the US payment company Syncapay.

In addition to these proceeds, Wirecard Bank also holds 300 million euros in cash. The manager is also evaluating whether to file a claim against the former Wirecard board member and the former auditor of the payment group Ernst & Young under the director and executive liability insurance.

Other Wirecard creditors rejected Union’s claim and submitted two legal opinions to the administrator explaining their situation.

The lawsuit filed by Union is a test case against a wider group of institutional shareholders, who suffered nearly 2 billion euros in losses in the closure of Wirecard and hope to obtain compensation. Burford Capital, a London-listed litigation funding agency, is funding the litigation.

A spokesperson for the Munich District Court confirmed that the lawsuit has been filed recently, but the hearing date has not yet been determined. The spokesperson said: “It is not yet possible to foresee when a decision will be made.”

A spokesperson for the Wirecard administrator declined to comment.

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