German regulatory officials bought and sold Wirecard shares in ever higher volumes as the payments company edged towards collapse, the German government has revealed, prompting fresh criticism of the agency that polices finance.
Responding to questions posed by Green party lawmakers investigating what authorities did to avert Germany’s biggest stock market fraud, the government said staff in Bafin, which monitors banks, had invested in Wirecard shares.
The implosion of what was seen as a rare German technology success story once worth $37-billion has caused major embarrassment, with experts and politicians criticizing what they see as a hands-off approach on the part of the regulatory authorities.
Allegations of fraud at Wirecard had been doing the rounds for years though German prosecutors long focused on investigating the investors and journalists who had highlighted irregularities rather than the company itself.
In its answer, the German Finance Ministry said one-fifth of Bafin staff had engaged in some kind of investment activity in 2019 and 2020, with an increasing interest in Wirecard in the months ahead of its collapse.
In the six months to the end of June, 2.4 per cent of investment activity by Bafin staff related to buying and selling Wirecard stock or derivatives, up from 1.7 per cent in 2019 and 1.2 per cent in 2018.
Danyal Bayaz, one of the lawmakers who tabled the questions, said Bafin’s compliance controls needed to be examined, and other lawmakers were similarly critical.
“The trading in Wirecard by Bafin staff is surprising and raises questions, such as the size of the trades and whether officials who traded had insider knowledge,” said Florian Toncar, a lawmaker in the German parliament, the Bundestag.
The Finance Ministry said Bafin had strict controls in place to guard against insider trading. In its answers, it said the spike was not unusual, given the volatility in Wirecard’s shares and media reports about the firm. Bafin declined to comment.
Last month, German prosecutors arrested three former top executives of Wirecard, saying it suspected them of masterminding a criminal racket to fake the company’s accounts and cheat creditors out of billions of euros.
The political fallout has also reached Chancellor Angela Merkel after her office said she raised Wirecard’s proposed takeover of a Chinese company during a visit to that country last September, although she was unaware of the irregularities at the time.
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