Prosecutors in Frankfurt are opening a criminal investigation into the way Germany’s financial regulatory authority BaFin supervised Wirecard AG, and whether a portion of the watchdog’s workforce traded shares unlawfully, Bloomberg reported.
Wirecard collapsed last year following the disclosure that $2.3 billion in cash likely was never in existence. The move brought about a parliamentary inquiry into the way in which BaFin, among others, dealt with one of Germany’s largest business scandals.
Per the report, Frankfurt prosecutors said they started the investigation upon reviewing data taken from BaFin in February when they went to the agency’s offices. A representative for the prosecutors said that individual suspects have not been identified, and noted that the matter focused on possible contraventions of the country’s stock market regulations.
Bloomberg reported that BaFin did not immediately respond to an emailed request for comment.
In January, BaFin filed its own criminal complaint with Stuttgart prosecutors against one of its staff regarding potential insider trading of Wirecard stock.
The news comes as Germany is aiming to bolster BaFin management and intends to bring leading experts onboard to supervise regulations. Beyond hiring top-tier professionals, the watchdog intends to build out a task force to look into all suspected accounting fraud, according to Deputy Finance Minister Joerg Kukies.
In the past, BaFin depended on a different regulator for accounting probes. “We want a stronger, proactive supervisor with more teeth,” Kukies previously told Bloomberg. The next BaFin leaders will have global expertise and the capacity to “turn BaFin into a world-class supervisor,” according to Finance Minister Olaf Scholz.
BaFin faced controversy for its actions in the Wirecard debacle, as the watchdog reportedly didn’t look into warnings regarding Wirecard and instead cast more scrutiny on accusers. The people warning BaFin regarding Wirecard’s possible fraud and money laundering activity included U.S. authorities and investors, among others.
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