Wirecard Legal Drama: 13,000 Investors Seek Compensation
When the Numbers Don’t Add Up: A Legal Circus Awaits
Ah, Wirecard—where a company can lose 1.9 billion euros like it was loose change under the couch cushions. This time, we’ve got a courtroom showdown brewing with 13,000 investors waving their legal flags, wondering where their money went. Picture it: November 22, 2024, in Munich—quite the place for schnitzel and… legal wrangling!
It seems both the auditors and Wirecard’s business figures were on a little holiday together—nearly 2 billion euros gone, poof! But hold on to your briefcases, because EY, the auditing firm that gave Wirecard a shiny stamp of approval, is now facing the music. This is like chasing someone down for bad karaoke—everybody knows they messed up, but will they pay the price?
Collective Action: All for One and One for All?
Now, our beleaguered investors are not entirely alone in this mess. Thanks to a law that rolled out in 2005 with the aim of preventing these financial fiascos, they have organized themselves into a battalion of lawsuits. It’s the court’s version of a flash mob—one brave soul takes center stage to clarify what went wrong for everyone else. Let’s hope the judge has better taste in music and proceedings than the last Deutsche Telekom case, which took a whopping 20 years! By the time they settled, the model plaintiff had likely forgotten why they were even there.
False Information: The Claim to Fame
In this high-stakes drama, the crux of the issue lies in whether Wirecard fed their investors a steady diet of bold-faced lies on their financial statements. If you sprinkle in some suspect auditor opinions and misleading ads into that, you’ve got the perfect recipe for a legal buffet! As Martin Kühler from the Tilp law firm explained, if a bank advisor is just selling snake oil with hidden fees, well buddy, you’ll have to sue that bank—because no one’s chasing that chicken in this farmyard. The real juicy meat is in the false info provided about securities.
How to Join the Legal Party
Fancy joining this colorful legal parade? To participate, you ought to be represented by a lawyer, which confirms that when it comes to suing, it helps to have a bit of professional help rather than trying to negotiate with a legal dictionary and a prayer. The beauty of this process is that if you form part of the mob, your statute of limitations temporarily hits ‘pause. That’s right, your claims won’t expire faster than your milk!
The Clock is Ticking: The Statute of Limitations
But be wary! If you’re thinking of jumping on the bandwagon now, you might want to check the expiry date on your claim. The court’s not going to wait for you forever; claims regarding the Wirecard scandal had to be filed by the end of 2023—essentially as gone as the millions they lost! Next time, chaps, set a calendar reminder.
New Horizons: Legal Options Expanding
But wait, there’s more! Thanks to some legislative sprucing up, the law now includes avenues for those impacted by crowdfunding and crypto projects. That’s right; if you got misled by flashy graphics and flashy promises in the wild west of finance, you might still have a shot at redress! Sounds almost too good to be true? Well, we live in a world where numbers can vanish, so anything is possible!
The Price of Justice: Is it Worth It?
For the investors, combining their forces serves a purposeful cause—not only does it promise more manageable costs, it allows the little guy to cover legal fees without losing their entire life savings. In a world where you could lose thousands, the collective action under KapMuG can significantly reduce the financial burden. For example, facing a loss of 10,000 euros? Going solo might hit your wallet with close to 4,500 euros in fees. Join the model case under KapMuG? You’re looking at less than half that—a bit like shopping at a discount store—but one where you might also get your money back!
A Final Thought: Will Justice Be Swift or Just More of the Same?
As this case unfolds, many will keep their fingers crossed that the wheels of justice start turning a bit faster than they did for previous cases, like Deutsche Telekom. Given the experience from past trials, a verdict after approximately five years seems hopeful but not exactly speedy. Here’s hoping we don’t have to wait around for someone to bring us coffee while we sit in the courtroom!
In conclusion, remember folks: when investing, keep an eye on your figures and even closer on your auditors. Because in the wild ride that is the financial markets, sometimes it takes a whole army of 13,000 to fight back against mismanagement and deceit. And who knows—they might just walk away with a happy ending… or at least a refund.
13,000 Wirecard investors want compensation
On Friday, November 22, 2024, a landmark court case will commence in Munich, potentially reshaping the landscape for thousands of Wirecard AG shareholders seeking restitution. Central to this test case is the examination of whether the company’s financial figures were deliberately misreported, while questions also linger about the adequacy of scrutiny exercised by the auditing firm involved. Should the court find in favor of the plaintiffs, those injured could secure substantial financial compensation. Wirecard AG, once a prominent player in the payment services sector and part of Germany’s prestigious DAX index, declared bankruptcy in 2020 after revelations surfaced that a staggering 1.9 billion euros in reported bank balances were fictitious.
With Wirecard’s financial well having run dry, the focus now shifts to Ernst & Young (EY), the auditing firm that provided an unqualified opinion on Wirecard’s financial statements up to 2018. Legal counsel representing the investors contend that EY failed to identify glaring discrepancies, notably the exclusion of nearly two billion euros from the balance sheet. As the principal defendant in this substantial test case under the Capital Investor Model Procedure Act (KapMuG), EY faces a collective lawsuit from around 13,000 plaintiffs, encompassing both private investors and institutional investment firms, who are collectively pursuing over 700 million euros in damages (see also the Wirecard case).
One for all – that is the idea
The mass lawsuit filed by thousands of Wirecard investors has prompted the legislature to establish model procedures as far back as 2005. This legislation was originally designed to streamline the process of collective legal redress and allowed for the consolidation of multiple lawsuits, such as the 12,000 claims against Deutsche Telekom into a singular, actionable case. The overarching idea is straightforward: one designated plaintiff would address pivotal factual and legal issues in court, thereby creating a precedent beneficial for all similarly situated investors. The prerequisite for obtaining such a model procedure is the presence of at least ten investors with analogous cases who petition the court.
Nevertheless, investors seeking justice in the Deutsche Telekom case endured a lengthy waiting period, spanning over two decades before they could secure compensation. In a long-awaited turn of events, Deutsche Telekom finally presented a settlement offer in late 2021 that acknowledged the investment losses incurred in the early 2000s. Affected investors who had purchased shares with the expectation of value retention were promised reimbursement for their losses, along with a significant interest payment on the return.
Regrettably, the pivotal model plaintiff in the Telekom proceedings, a Swabian pensioner, did not live to see the culmination of the case, nor did his legal representative. This sobering outcome has created a consensus among legal experts that reforms were urgently needed to ensure timeliness in such litigation. Consequently, the law governing model procedures has undergone several amendments, most recently in July 2024, to prevent protracted legal battles.
Requirement for compensation: false information
Under the current legal framework, plaintiffs can initiate model lawsuits for damages if a capital market provider disseminates information that is false, misleading, or omits critical disclosures pertaining to securities or investment products. This includes exaggerated financial figures, unfounded auditor opinions, and inaccuracies within the disclosure documents for investment offerings, encompassing everything from traditional funds to contemporary crypto products. Furthermore, misleading advertising materials, such as promotional flyers, are also subject to scrutiny.
A lawyer must submit the application
For a model case to be considered, a minimum of ten similar claims must be submitted to the relevant Higher Regional Court (OLG). Following this, the court will delineate the pertinent questions to be addressed and will appoint a model plaintiff to represent the collective interests.
Once the model plaintiff is identified, other aggrieved investors have a six-month window to register their claims with the designated regional court, colloquially known as the litigation court. Legal representation is a prerequisite, with many investors opting for law firms specializing in capital market legislation.
A significant benefit for investors who join the test case is that the statute of limitations on their claims is effectively paused from the time the application is filed, affording them additional time to pursue their grievances.
Pay attention to the statute of limitations
The current regulation stipulates that claims related to securities will reach their statute of limitations three years after the investor becomes aware of conditions that would warrant compensation. This timeline commences at the close of the fiscal year in which the claim originated.
Notably, the manipulation of Wirecard’s financial statements, which included forged documentation, came to light in mid-2020, despite earlier critical inquiries into the firm. Consequently, those with claims regarding price devaluation must have their grievances lodged by December 31, 2023; failure to do so will render them ineligible to partake in the ongoing proceedings.
Legal action possible due to a rating
The latest revisions to the law explicitly permit legal actions against auditors and credit rating agencies. Under the newly updated legislation, audit opinions and ratings related to annual financial statements are recognized as “public capital market information.” This recognition extends to novel financial products, thus allowing for model lawsuits based on inaccurate disclosures relating to crowdfunding initiatives or cryptocurrency assets.
The law now also mentions crowdfunding
Tobias Pielsticker, a lawyer from Witt Rechtsanwälte, has initiated the first model case for crowdfunding investors under the new legal framework at the Berlin Regional Court. He has also filed additional model procedural requests, showcasing a proactive approach to investor rights. Pielsticker expresses optimism about these legal avenues: “Often, the amounts of damages may be relatively modest, rendering individual legal pursuits disproportionately costly.”
Conversely, Lutz Tiedemann, a lawyer from GTG Rechtsanwälte in Hamburg who specializes in crowdfunding cases, voices concerns: “Model procedures will not be universally applicable for every legal query surrounding crowdfunding.” Nonetheless, investors who have engaged with closed funds, derivatives, or bonds have already had avenues to collectively pursue model lawsuits.
Request production of evidence
A notable update allows both plaintiffs and defendants to require the submission of documents and evidence from each other, including communications via email or internal agreements, as stipulated in Paragraph 17 of the KapMuG. Unfortunately for the plaintiffs in the Wirecard case, this option is not available to them; the previous version of the KapMuG remains applicable in their lawsuit.
This is intended to speed up the procedures
Streamlined process. The recently reformed KapMuG aims to expedite the legal process. The responsible regional court is now mandated to announce a model case application within a three-month period, halving the previous timeframe of six months. Furthermore, it will develop a template outlining the objectives of its findings. The Higher Regional Court retains the authority to modify this template, thereby streamlining the overall model procedure.
Parallel procedures. To mitigate confusion and excessive legal representation, forthcoming regulations will allow for the simultaneous progression of individual lawsuits alongside test cases. In the past, all analogous proceedings would automatically be postponed when a model procedure was initiated, but plaintiffs may now assert their own claims in parallel with a test case, provided they explicitly request suspension of their own proceedings while opting into the model case.
Lawyers fear inconsistent jurisprudence
Legal professionals representing both parties express concern over the potential complications arising from simultaneous individual lawsuits alongside the test case. “Inconsistent case law could be the result,” warns lawyer Paul Kintrup from CMS, a firm recognized for its representation of closed-end fund providers. Based on his experience, he believes that a range of attorneys representing various plaintiffs does not necessarily pose a risk of delaying the proceedings.
Investor advocates share similar sentiments. Katja Fohrer from the Mattil law firm in Munich articulates her astonishment: “The intent was to alleviate the burden on the courts. Now, we face the risk that a variety of judges may independently tackle similar issues.”
Courts now have more experience
Nonetheless, lawyer Kühler remains optimistic that test cases will not suffer the extensive delays experienced in previous cases like Deutsche Telekom. “The higher regional courts have gained considerable experience over the years,” he notes. Generally, after an elapsed time of approximately five years, a verdict is anticipated in medium-sized cases.
Model proceedings more cost-effective for injured parties
One of the most significant advantages of collective lawsuits under the KapMuG is the financial accessibility they offer to injured investors, effectively reducing their legal costs compared to pursuing individual claims. Wolfgang Schirp, an attorney well-versed in capital market law, provides a contrasting illustration:
An investor who incurred a loss of 10,000 euros in the Wirecard case and decided to file an individual lawsuit could be liable for approximately 4,500 euros in court and legal fees if they lost the case. In contrast, should they participate in a test case under KapMuG, their maximum risk of legal fees would be nearly halved to about 2,180 euros. Investors who merely register claims without actively suing would face a nominal fee of just 608 euros.
E of outcomes from the simultaneous proceedings may lead to legal uncertainties. This could cause discrepancies in how cases are adjudicated and precedents established, further complicating the resolution of investor grievances.
Moreover, the worry is that if individual lawsuits yield varying results, investors may see an uneven landscape of compensation, undermining the collective approach that model procedures aim to promote. Such inconsistencies could weaken investor confidence in the legal system when pursuing claims, particularly in complex financial cases like Wirecard, which involve substantial sums and intricate financial instruments.
While the recent reforms to the KapMuG may accelerate the legal process and enable more collective actions, the introduction of parallel lawsuits demands careful navigation to ensure fairness and coherence in the resolution of all claims. Still, the primary objective remains to secure justice for investors who have experienced losses due to corporate misconduct.
In this evolving legal environment, it will be crucial for investors to remain informed about their rights and the status of ongoing proceedings. As outlined earlier, the statute of limitations for filing claims is a critical consideration, and investors must act promptly to preserve their opportunities for redress.
With new model lawsuits emerging and the landscape of investor rights gaining legislative momentum, the coming years will undoubtedly be telling for the many investors seeking restitution from cases like Wirecard. As the wheels of justice slowly turn, they may yet yield a more robust framework for accountability in the financial markets—one that not only addresses past wrongs but also sets clearer standards for the future.
