DSW positions 30,000 Wirecard investors against EY

DThe German Association for the Protection of Securities (DSW) wants to put pressure on the audit firm EY to find a way to compensate Wirecard investors out of court. For this purpose, after about a year of preparation, DSW created a non-profit foundation under Dutch law. According to DSW, the Dutch compensation fund should not only target EY Germany. but also EY Global, that is, the international network of auditors to which the German branch of EY in charge of examining Wirecard’s business figures belongs.

With this instrument, DSW wants to pool claims from 30,000 registered private investors and a total loss of €1.5 billion. Other investors can join for free if they haven’t already sued EY for damages for their Wirecard losses by other means. This also applies to investors who are not based in Germany. DSW chief executive Marc Tüngler described the foundation on Wednesday as a “perhaps a bit smarter solution” compared to other alternatives. What is meant is the investor’s test case against EY, the opening of which is currently being examined by the Bavarian Supreme Regional Court. Furthermore, as of March, there are 900 individual lawsuits against EY by Wirecard victims in the Munich Regional Court.

Third path to the goal open

There are now three ways for investors to obtain possible compensation from the auditors: the Dutch foundation with the compensation fund, the investor’s test case, and the individual lawsuit. What they have in common is that the shareholders and creditors of the former member of Dax Wirecard, which went bankrupt in June 2020, are demanding damages from the auditing company responsible for the company, EY. EY has verified and certified Wirecard’s annual balance sheets since 2009, that is, confirmed compliance of business figures with legal regulations. EY only refused certification of the 2019 annual financial statements, with Wirecard having to admit that €1.9bn was missing. Bankruptcy filing followed soon after.

According to Andreas Lang, a partner at the law firm Nieding+Barth, Wirecard should have reported a loss rather than a profit in 2017. The auditing firm KPMG, which was later called in as a special auditor, then recognized immediately and without forensic methods that there had been no confirmation of the existence of allegedly high bank balances. EY was unable to obtain these confirmations from independent third parties. For auditor Ulrich Harnacke, who sits on the DSW presidium, it was clear from the start that EY had breached basic audit routine on this point.


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