Thursday 2 July 2020 2:50 pm

Head of German regulator calls Wirecard fraud a 'massive criminal act'

The head of Germany’s financial watchdog has called the accounting scandal at Wirecard a “massive criminal act”.

The German payments processing firm filed for insolvency after an accounting scandal which saw €1.9bn missing from its balance sheet. Former chief executive Markus Braun was last week arrested on suspicion of fraud and market manipulation.

Read more: Head of audit review calls for urgent reform after Wirecard scandal

“It is plain vanilla, old-fashioned criminal behaviour,” BaFin president Felix Hufeld said in an online panel discussion.

This week German prosecutors raided Wirecard’s offices in Germany and two locations in Austria as part of a probe into the firm.

However the regulator is coming under increased scrutiny in its part to play in the scandal, particularly its decision to impose a two-month ban on short-selling the company’s stock.

It also filed a criminal complaint against two Financial Times reporters who wrote about whistleblower allegations of accounting issues at the firm’s Singaporean subsidiary. Hedge fund tycoon Crispin Odey today said he plans to sue BaFin for millions of pounds after it banned short selling.

Yesterday Hufeld told German MPs that BaFin’s ability to act was limited because Wirecard was classified a tech firm rather than a financial services provider.

Read more: Wirecard offices raided by Munich prosecutors over missing €1.9bn

In a closed-door session of the Bundestag’s finance committee, Hufeld denied the regulator had sought to protect the firm, according to the Financial Times.

Last week the European Commission set out its intention to ask the European Securities and Markets Authority to assess the regulator’s role in the Wirecard affair.