Staff at German regulator boosted bets on Wirecard shares in run-up to collapse

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Workers at Germany’s finance watchdog bet repeatedly on Wirecard shares before the payments company collapsed in one of Europe’s biggest ever suspected accounting frauds

Staff at regulator BaFin increasingly traded in the bust firm's stock or derivatives in its final months, according to figures revealed by the German Parliament.

It will raise further questions over the watchdog’s supervision of Wirecard and whether its staff had a conflict of interest. BaFin went to great lengths to quash criticism of the former German market darling as the scandal built, even launching criminal investigations against critics of the company's accounting practices.

The company filed for insolvency in June after admitting that €1.9bn (£1.7bn) of cash on its balance sheet probably did not exist. Criminal investigations are underway.

Wirecard shares or derivatives accounted for 2.4pc of all dealings disclosed by BaFin employees in the first half of 2020. This was far higher than in 2018 and 2019 when they constituted 1.2pc and 1.7pc respectively. 

The German finance ministry said about a fifth of employees at the watchdog disclosed trading on the markets in 2019 and the first half of 2020. 

These trades were approved by line managers, showing staff did not benefit from inside information when they bought and sold stock, it said. The ministry added that this level of trading was not unusual. 

The ministry revealed the figures in response to questions from the Green Party. 

Matthew Earl, managing partner of hedge fund ShadowFall Capital & Research and an early critic of Wirecard, called the revelations "unbelievable”.

The rules at the German regulator, which has been heavily criticised for failing to prevent the scandal, are looser than at its British counterpart. 

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Staff at the Financial Conduct Authority are not allowed to trade shares in companies regulated by the watchdog. 

It is not known whether any BaFin staff were shortselling Wirecard stock - a bet on the share price falling - before the company collapsed. 

The information also raises questions about whether staff benefited from BaFin’s controversial decision to temporarily ban shorting of Wirecard shares last year. 

BaFin halted bets against the company’s shares for two months citing concerns over market volatility. It filed a criminal complaint against two Financial Times journalists for reporting on suspected accounting irregularities at the Wirecard.

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