RegisterView registration
Menu
What happened?

Overview of the background of the Wirecard scandal and EY’s role

The Wirecard case is one of the biggest economic scandals in the post-war period. Wirecard, a former “jewel” of the German stock market, collapsed like a house of cards in 2020 after it was revealed that the company’s stellar growth was based on years of fraud and balance sheet manipulation. The company filed for bankruptcy soon after. Wirecard’s share price imploded and shareholders, many of them small/private investors, lost practically all of their money invested in Wirecard.
Woman seeing her investment vaporise

That the rampant fraud within Wirecard went unchecked for so long is in no small part due to the company’s auditor, EY. EY has audited Wirecard's financial statements since 2009 and, despite clear indications and red flags, both from Wirecard employees and reporting in the press, the accounting firm gave unqualified approvals of Wirecard’s accounts right up to FY2018.

A report submitted to the Wirecard Special Committee of the German parliament Bundestag by a specially appointed auditor (the so-called Wambach Report) suggests that if EY had audited Wirecard in accordance with applicable legal and professional standards, investors would have been made aware of the fraudulent business practices much earlier.

It is clear that EY failed to properly carry out its duty to critically investigate the many indications of fraud within Wirecard before approving the company’s accounts. To name an example, the FY2018 annual accounts included EUR 1.9 billion (!) in cash, which was supposedly held in an escrow account and could be easily accessed by Wirecard, but for which the company could not produce a simple balance confirmation. Subsequent investigations such as the Wambach Report have revealed that approximately 25% of Wirecard’s balance sheet, as well as virtually all of the company’s profits, were likely based on complete fabrications.

In light of the above, the foundation believes that EY is co-responsible and therefore liable for the losses suffered by investors as a result of the Wirecard scandal.

 

Overview of (legal) basis for claims against EY

The foundation and DSW believe that there is a strong case to be made that EY (Ernst & Young) is liable for damages suffered by investors as a result of the Wirecard scandal. This liability would not be limited to Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, the German EY branch that performed the Wirecard group audits (EY Deutschland), but would also extend to other entities within the global EY network such as the parent entity Ernst & Young Global Limited (EY Global).

For EY Deutschland, liability follows from the fact that it clearly failed to meet applicable legal and professional standards when auditing Wirecard’s accounts, and consistently ignored obvious red flags that Wirecard’s accounts were fraudulent. For EY Global, liability follows from the fact that it breached fundamental supervisory obligations and minimal compliance standards in relation to EY Deutschland. In failing to identify the obvious shortcomings of EY Deutschland’s auditing of Wirecard, EY Global is also responsible for the damages suffered by Wirecard investors.

How do I register as a participant?

Eligible Wirecard investors may register online through our portal. The registration process is intuitive and can be completed in several minutes.

Personal details

In order to register as a participant, the foundation requires:

  • your full name and date of birth (as in identity card)
  • your full address (a P.O. Box is not sufficient)
  • your e-mail address
  • bank details (IBAN, BIC and name of account holder), so that the foundation knows where to transfer your share of any realised compensation.
  • signing the necessary documentation (Participation Agreement and Powers of Attorney, see also the FAQ under “What are the terms and conditions for registering as a participant?”)

When registering, keep your identity card (e.g. a passport) close at hand to ensure that your personal details are registered correctly.

Please make sure that the name(s) in the registration are the same as the name(s) of the securities account holder(s). This is particularly important as, if a securities account is held in the name of more than one person, the account holders can only claim damages jointly.

How will compensation be obtained from EY?

The foundation will seek compensation for injured Wirecard investors by facilitating litigation in Germany or by negotiating a settlement agreement with EY (or, if necessary, a combination of the two).

1. Litigation in Germany

In the event that EY is not (yet) willing to reach an out-of-court settlement, the foundation’s German lawyers, Nieding+Barth, will initiate court proceedings on behalf of all registered participants of the foundation simultaneously against Ernst & Young Wirtschaftsprüfungs GmbH (EY Deutschland) and Ernst & Young Global Limited (EY Global). The proceedings will be brought before the Munich I Regional Court.

In a decision dated March 14, 2022, the Munich I Regional Court issued an order for reference in proceedings brought by shareholders against both Dr. Markus Braun (former CEO) and EY Deutschland. It remains to be seen whether the Bavarian Supreme Regional Court will now actually open capital investor model proceedings (KapMuG proceedings) against Dr. Braun and EY Deutschland on the basis of this order for reference.

In any case, the order of reference of the Munich Regional Court I and any KapMuG proceedings that may follow do not deal with the liability of EY Global. In failing to identify the obvious shortcomings of EY Deutschland’s auditing of Wirecard, EY Global is also responsible (and therefore liable) for the damages suffered by Wirecard investors.

Furthermore, it is unlikely that EY Deutschland alone will offer sufficient recourse to compensate injured Wirecard investors in any significant way without slipping into insolvency. At the Deutsche Schutzvereinigung für Wertpapierbesitz e.V. (DSW; German Shareholder Protection Association) alone, 30.000+ investors have already registered, representing total damages of more than EUR 1.5 billion.

In light of the above, the foundation strongly believes that EY Global must be included in the litigation. This approach sets the foundation apart from other initiatives seeking compensation for injured Wirecard investors.

2. Negotiating a (collectively binding) settlement with EY

Although the foundation is willing and able to take EY to court if necessary, the quickest and most cost-effective way to achieve compensation for injured investors is always through a settlement agreement.

Should a settlement agreement be concluded between the foundation and EY, the fact that the foundation is incorporated under Dutch law opens up the possibility of having this settlement declared collectively binding for all European investors. This method has been successfully applied in collective settlements in various cases of mass (investor) damages.

Additional info re. separate steps/progression of litigation

If EY proves unwilling to conclude a settlement, Nieding+Barth will initiate court proceedings on behalf of all registered participants simultaneously.

Initiating court proceedings first requires preparing a writ of complaint. Once the writ of complaint (which will include all claims of registered participants) has been completed, Nieding+Barth will file it with the Munich I Regional Court. The lawsuit will then be served on the defendants, EY Deutschland and EY Global.

At the same time, the Regional Court will request the defendants to show that they are prepared to defend themselves and to respond to the lawsuit within a certain period of time. The plaintiffs, represented by Nieding+Barth, will then be given the opportunity to comment on the statement of defense.

Of course, the foundation will provide regular updates about the progress of any court litigation.

Frequently Asked Questions

In order to validate (the value of) your claim, the foundation needs proof of your claim. Therefore, you are asked to provide a complete overview of all your transactions (purchases and sales) with respect to eligible Wirecard securities (for an overview of eligible securities, see the FAQ under “Who can register with the foundation?”).

You can enter the details of your transactions (type of security; date of sale/purchase; amount of securities, price per security; and transaction fees) into the registration platform one by one.

Only if you made many different transactions (i.e. more than 15 different transactions), instead of listing all your transactions one by one, the online registration platform also allows  you to save time by uploading a CSV/spreadheet file (in pdf) which lists the details of all your transactions.

CSV stands for comma separated values. It is a common format used to list investment data, such as sales/purchases of securities. Most banks/brokers allow their clients to download or export investment data in CSV-format. If your bank/broker does not allow you to export your transaction data in CSV format, it is still possible to fill in the details for each transaction one by one in the registration platform.

The foundation is working with German law firm Nieding+Barth.

As part of the online registration process, you will be asked to digitally sign several documents (Participation Agreement and power of attorney. Next to this, you are asked to also provide a hardcopy power of attorney (POA) authorizing Nieding+Barth to represent you in court against EY. The Nieding+Barth POA must be printed and signed by original “wet ink” signature (see also the FAQ under “What are the terms and conditions for registering as a participant?”)

If you have already sent Nieding+Barth a signed POA via post before going through the online registration platform, it is not necessary to do this again.

Once you have completed the registration process, the Foundation will analyse the documentation you have provided in order to validate your claim. This analysis also includes estimating your damages.

The Foundation may contact you to provide additional information for the analysis, if necessary. For the analysis, the Foundation has developed a damage-calculation model in close consultation with a renowned financial advisory firm.

The Foundation will notify you of the results of the claim-analysis.

If the Foundation concludes that, sadly, it is unable to validate your claim, the Foundation will inform you of the reasons for this. In that case, you will be able to terminate the Participation Agreement with the Foundation.

See also article 3 of the Participation Agreement with the Foundation, which can be reviewed as part of the registration process.

Yes, registration is open to all investors who held eligible Wirecard securities in the relevant period (see the FAQ under “Who can register with the foundation?”).

No, there is not a minimum amount of damages that an investor must have suffered in order to register with the Foundation.

Once you have completed the registration process, the Foundation will estimate your damages according to its damage-calculation model based on the documentation you have provided. The model has been developed in close consultation with a renowned financial advisory firm. The foundation will share the results of the damage estimation through a personal e-mail as soon as possible.

In order to validate (the value of) your claim, the foundation requires documentation verifying that you held Wirecard Securities in the relevant period (7 April 2015 to 18 June 2020). For an overview of eligible securities, please see the “frequently asked questions” (FAQ) on the foundation’s website, under “Who can register with the foundation?”.

Investors are asked to provide this information/documentation in two steps as part of the online registration process.

Step 1: Providing a complete overview of your position as a (former) Wirecard investor

As part of the registration process, you will first be asked to provide details relating to your transactions related to eligible Wirecard securities. Please list all transactions (buy and sell), including any transactions that occurred outside (before or after) the relevant period. The foundation needs a complete overview of your position as a (former) Wirecard investor.

You can enter the details of these transactions (type of security; date of sale/purchase; amount of securities, price per security; and transaction fees) into the registration platform one by one.

CSV export data

Only if you made many different transactions (i.e. more than 15 different transactions), instead of listing all your transactions one by one, the online registration platform also allows you to save time by uploading a CSV/spreadheet file (in pdf) which lists the details of all your transactions.

CSV stands for comma separated values. It is a common format used to list investment data, such as sales/purchases of securities. Most banks/brokers allow their clients to download or export investment data in CSV-format.

If your bank/broker does not allow you to export your transaction data in CSV format, it is still possible to fill in the details for each transaction one by one in the registration platform.

Step 2: Uploading proof of your transactions

Once you have provided the details about all of your transactions (see above) you will have to provide proof of those transactions:

  • In any case, the foundation requires receipts for each of the listed transactions.
  • If possible, the foundation would also like to receive a recent securities account statement from your bank/broker showing your current position as a (former) Wirecard investor. But this is not mandatory.

The documents can be uploaded as part of the online registration process.

Viewing/amending your transaction data/documentation

Once you have completed your registration, it is always possible to view your registration data and, if necessary, add transactions and upload additional documentation. It is not possible to delete data/documentation you have already uploaded.

If you have accidentally uploaded the wrong documents, this is not a problem. In that case we ask that you upload the correct documents additionally.

Injured Wirecard investors may register with the foundation free of charge. All costs (including legal costs for litigation and/or settlement) are borne by the foundation. In order to finance the initiative the foundation has obtained external funding from a professional third-party litigation funder.

The foundation’s services to participants are provided on a “no-cure-no-pay” basis. This means that the Foundation will only receive a fee if the Foundation is successful in obtaining compensation for the participants.

In the event of a settlement or successful litigation against EY, the compensation will be split between the injured Wirecard investors (75%) and the foundation (25%). The foundation’s fee of 25% of the compensation will be used to cover the foundation’s costs. This for instance includes legal and other advisory costs, as well as the satisfaction of the third-party funder’s return on investment. The exact terms and conditions of participating in this initiative will be laid down in a participation agreement with the foundation.

The foundation itself is strictly a non-profit organisation.

In order to successfully register, you need to enter into a participation agreement with the foundation. The participation agreement contains the terms and conditions of registering with the foundation.

In addition to the participation agreement, you need to sign two powers of attorney:

  1. one power of attorney authorizing the foundation to conclude a settlement with EY on your behalf; and
  2. one power of attorney authorizing the German law firm Nieding+Barth, which is advising the foundation, to initiate legal proceedings on your behalf in the event that EY is not willing to reach a settlement.

Signing the participation agreement and power of attorney to the foundation (electronic)

The participation agreement and the power of attorney to the foundation will be signed electronically during the online registration process.

As part of the online registration process, you will be asked to draw a digital signature (using your mouse or, if you are using a touchscreen, your finger) which will be pasted into the participation documentation.

It is not necessary to print and sign the participation agreement and/or the power of attorney to the foundation in “wet ink”.

Signing the power of attorney to Nieding+Barth (“wet ink”)

The power of attorney for Nieding+Barth must be printed out and signed with a handwritten “wet ink” signature. This is a necessary step to ensure that Nieding+Barth can successfully represent you in court. If your Wirecard securities are/were held on a securities account held by more than one person, please make sure that the names and signatures of all securities account holders are on the power of attorney.

Once the registration is complete, we will ask you to print, sign and send (only) this power of attorney to Nieding+Barth (a scanned version by e-mail, and the original by post). The correct address (e-mail and post) can be found on the signature pages of the power of attorney to Nieding+Barth.

Please send Nieding+Barth the entire power of attorney (five pages). It is not sufficient to print and sign only the signature page of the power of attorney.

Please note that you only need to print, sign and send the power of attorney to Nieding+Barth once. If you have already done this before going through the online registration process, it is not necessary to do this again.

It is not necessary to print and sign any other documents in “wet ink”.

Eligible Wirecard investors may register online through our portal. The registration process is intuitive and can be completed in several minutes.

Personal details

In order to register as a participant, the foundation requires:

  • your full name and date of birth (as in identity card)
  • your full address (a P.O. Box is not sufficient)
  • your e-mail address
  • bank details (IBAN, BIC and name of account holder), so that the foundation knows where to transfer your share of any realised compensation.
  • signing the necessary documentation (Participation Agreement and Powers of Attorney, see also the FAQ under “What are the terms and conditions for registering as a participant?”)

When registering, keep your identity card (e.g. a passport) close at hand to ensure that your personal details are registered correctly.

Please make sure that the name(s) in the registration are the same as the name(s) of the securities account holder(s). This is particularly important as, if a securities account is held in the name of more than one person, the account holders can only claim damages jointly.

Investors who have joined the insolvency proceedings against Wirecard can (and should) also register with the foundation’s initiative against EY.

Note that the insolvency proceedings are conducted completely independent from the Foundation’s proceedings. A registration in the insolvency proceedings is neither required nor an obstacle for a participation in the foundation solution.

In principle, you can always register with the Foundation.

If you already registered your claim against EY with and/or if you have already issued a power of attorney to another initiative, lawyer or law firm, it is still possible to register with the Foundation, provided that you then revoke the registration with and/or power of attorney to the other initiative, lawyer or law firm.

If your lawyer has already filed a lawsuit against EY on your behalf, you may have to withdraw your lawsuit. You would have to consult with your previous legal counsel what (financial) consequences this withdrawal would have for you. It is not possible to file two lawsuits at the same time. Please note that you will not incur any costs if you join the foundation’s initiative, neither in the event of an out-of-court settlement, nor in the event of court proceedings (legal action). 

Present and former holders of the following securities issued by (or on behalf of) Wirecard that were acquired or held in the period 7 April 2015 up to and including 18 June 2020 may register with the foundation through the online registration platform:

Wirecard share
WKN:                     747206
ISIN:                      DE0007472060

Wirecard ADR
CUSIP:                  97654L108 US
ISIN:                  US97654L1089

Wirecard bond
WKN:                     A2YNQ5
ISIN:                       DE000A2YNQ58
CUSIP:                  ZR4792175

Wirecard convertible bond (issued by Argentum Netherlands B.V.)
WKN:                     A2R8E6
ISIN:                      XS2055754217

18 June 2020 is the day Wirecard publicly confirmed for the first time that its accounts were fraudulent.

Is there a minimum amount of damages for an investor to register with the foundation?

No, there is not a minimum amount of damages that an investor must have suffered in order to register with the Foundation.

Once you have completed the registration process, the Foundation will estimate your damages according to its damage-calculation model based on the documentation you have provided. The model has been developed in close consultation with a renowned financial advisory firm. The foundation will share the results of the damage estimation through a personal e-mail as soon as possible.

What if I held other securities (certificates/derivatives/etc.) related to Wirecard?

Unfortunately, the foundation is currently not able to accept registrations of claims related to other Wirecard securities than the four securities listed above. We will publish more information on this issue at a later date.