Germany’s accounting watchdog denies accountability over Wirecard scandal

Head of German financial regulator describes disgraced firm’s “massive criminal act”

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The collapse of one of Germany’s leading financial technology firms has sent the nation’s regulators scrambling to both attribute blame and deny accountability.

Last week, Wirecard filed for insolvency with debts of $4bn (£3.2bn, €3.5bn) after its auditors were unable to account for a previously disclosed 1.9bn.

Immediately following the collapse of the company which was once worth $28bn, the European Commission called for a probe into how BaFin, the German financial regulator, missed the complex international fraud operation.

BaFin president Felix Hufeld recently described the scandal as “a massive criminal act” and “plain vanilla, old-fashioned criminal behaviour.” But the regulator has also stressed that other bodies were also responsible for overseeing the fintech firm, such as central banks and Wirecard’s home state of Bavaria.

Attempting to show that it was not asleep on the job, BaFin referred to its 2019 request that Germany’s accounting watchdog, the Financial Reporting Enforcement Panel (FREP), study Wirecard’s books following press reports of wrongdoing.

Itself denying accountability, FREP recently said that it did study Wirecard as quickly as possible and regularly updated BaFin but maintained that: “Tracking down accounting fraud and investigations are not part of our tasks.”

Nonetheless, following the world’s largest accounting scandal since Enron, Germany has announced that it will not henceforth work with the privately owned FREP.

Along with the regulatory blame game, Wirecard’s collapse has resulted in a series of significant legal battles.

On Thursday leading German supermarket chain Aldi sued Wirecard after the payments firm was no longer able to process its credit card payments.

The prominent British hedge fund manager Crispin Odey also recently announced that he plans to sue BaFin for the short selling of Wirecard stock in February. Seeking €18m, from the regulator, Odey still managed to make £25m from shorting the company whose market cap sank from €14bn to €383m in less than a month.

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