Leading German asset manager takes Wirecard administrator to court

A former top Wirecard shareholder is seeking damages over the collapse of the payments group in a landmark lawsuit that threatens the compensation bondholders and banks are also seeking.

Union Investment, Germany's third-largest asset manager, has filed a lawsuit in Munich against Wirecard's administrator, which over the past year has been selling the remaining assets of the failed payments group.

The asset manager said it suffered €243 million in losses when Wirecard filed for insolvency in June 2020. Before being exposed as a sham, Wirecard was hailed as a rare German tech success and was worth more than €24 billion at its peak in 2018, replacing Commerzbank in the country’s blue-chip Dax index.

The lawsuit cites more than 70 releases and company statements Wirecard made between 2014 and 2020 that Union says are misleading and fraudulent.

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“Our client [Union] was induced to buy the securities by fraudulent and misleading statements by Wirecard,” said Nadine Herrmann, a lawyer at Quinn Emanuel, adding that the claims of shareholders should be treated in the same way as other creditors in insolvency proceedings.

The claims of equity holders in an insolvency procedure are typically last in line under German law, settled only after other creditors have been paid.

“For us, the consequence [of that] would be not to receive any compensation at all”, a spokesperson for Union said, adding that the legal action was driven by the need to act “in the best interest of our clients”.

Banks and bondholders

If successful, the lawsuit would be a blow to the banks and bondholders who lent Wirecard more than €3 billion and would be forced to share any payout from the administrator.

According to a report seen by the Financial Times, creditors, shareholders and other aggrieved parties have filed more than €14 billion of claims with the administrator Michael Jaffé.

Mr Jaffé and his team have so far generated about €600 million selling Wirecard's assets, including its European core business to Spanish lender Santander and Wirecard North America to US payments firm Syncapay.

In addition to those proceeds, €300 million in cash is held at Wirecard Bank. The administrator is also evaluating whether to make a claim against former Wirecard board members under their director and officer liability insurance as well as against EY, the payment group’s former auditor.

Wirecard’s other creditors have dismissed the claim from Union, filing two legal opinions to the administrator laying out their case.

The lawsuit brought by Union is a test case for a broader group of institutional shareholders who suffered losses of almost €2 billion in Wirecard’s collapse and want compensation. London-listed litigation funder Burford Capital is financing the suit.

A spokesman for the Munich district court confirmed that the lawsuit had been recently filed, but that a date for a hearing had not been fixed. “It is not yet foreseeable when a decision will be taken,” the spokesman said.

A spokesman for Wirecard’s administrator declined to comment. – Copyright The Financial Times Limited 2021