Employees of the financial supervisory authority Bafin also traded in shares and derivatives of the leasing company Grenke – the group against which there are serious allegations of balance sheet falsification in the room and for which a special audit of the Bafin is running. This results from a response from the Federal Ministry of Finance to the Green finance politician Danyal Bayaz. Accordingly, three Bafin employees reported a total of twelve private transactions in securities of the MDax company this year by the end of September. Two employees dealt with shares in Grenke. An employee from the agency’s market surveillance department reported eight purchases and sales of derivatives. The answer to Bayaz is at Personal-Financial.com.
Bafin has a total of around 2,700 employees – the business of three employees could seem like individual cases at first glance. But in the past few weeks, the Bafin had already come under fire because some of its employees had increasingly traded shares and speculative derivatives of the scandalous group in the months before the Wirecard bankruptcy. As Personal-Financial.com reported in September, this also included high-risk, in some cases multi-leveraged financial instruments, including turbo certificates, knock-out papers and even Contracts for Difference (CFDs), which the financial regulator actually wants to discourage private investors from trading.
Parallels to the Wirecard case
Some employees in the WA2 department, which is responsible for tracking market manipulation and insider trading, as well as short sales, were already particularly active in Wirecard transactions. The deals have raised questions about possible conflicts of interest if Bafin employees can speculate privately with papers from a company that the agency is targeting. So far, officials have had to report private deals retrospectively. According to earlier information from the Federal Ministry of Finance, there was not a single case in the Bafin in which superiors considered a transaction to be questionable. In the first half of 2020, 531 Bafin employees reported a total of 8,267 securities transactions.
Unlike Wirecard, the Baden-Baden leasing provider Grenke was little known to the public until recently. For a long time, the company founded by Wolfgang Grenke, which earns its money by renting office equipment and IT equipment, has not played a role in private share transactions by Bafin employees either: According to the answer from the Ministry of Finance to the Green Bundestag member, Bayaz, for the years 2018 and in 2019 no transactions in Grenke securities were reported. In mid-September 2020, the company then moved into public focus after the well-known British shortseller Fraser Perring and his analytics company Viceroy Research made serious allegations of manipulation: Grenke allegedly inflated his balance sheets artificially with the help of acquisitions from affiliated companies. In addition, the Grenke Bank is involved in dirty business, such as money laundering. Grenke vehemently denied all allegations and commissioned KPMG’s auditors to carry out a special analysis. In response to the allegations, the share price collapsed by almost half at times and has only partially recovered since then.
Perring is an old acquaintance for Bafin: In 2016, he published analysis reports on irregularities in the balance sheets at Wirecard, which were then picked up by the British “Financial Times”. At the same time, he openly speculated with short sales on a falling share price of the payment service provider. Bafin therefore accused Perring of market manipulation and reported him to the Munich I public prosecutor in early 2019. Regardless of the feuds with the Bafin, he informed the financial supervisory authority in advance about the findings of the Viceroy analysts about Grenke. On the short message service Twitter, Perring published a photo of a mailing addressed to head of the authorities Felix Hufeld on September 10th.
In fact, the Grenke report by Viceroy, which also made a name for itself in the international financial world when the billion-dollar accounting fraud scandal at the South African-German furniture giant Steinhoff was uncovered at the end of 2017, was published on September 15. At the same time, Perring announced that it would hold short positions on the Grenke share. In response to Viceroy’s allegations, the German Audit Office for Accounting (DPR) – which is somewhat misleadingly referred to as the accounting police in view of its limited staffing options and is responsible for accounting control at the first stage according to previous law – started a special audit of the annual financial statements for 2019. At the end of September, however, the Bafin, in which a special audit under the Banking Act had already run against Grenke, took over the investigation by the DPR – unlike in the Wirecard case, in which the supervisory authority, according to the Ministry of Finance, had no options, the audit itself prematurely to be taken over by the FREP. Critics accuse the Bafin and Finance Minister Olaf Scholz (SPD) therefore failure.
Transactions in certificates in September
Information on the times at which the three Bafin employees traded with the shares and derivatives of Grenke can not be found in the listing for the Green finance politician Bayaz. However, the answer from the Federal Ministry of Finance shows that the employee in Department WA2 reported eight transactions with two so-called discount certificates with different terms in September. Discount certificates are futures transactions with a comparatively low risk, in which investors receive a discount on the underlying asset when they buy, but only benefit from price gains up to a certain upper limit (cap). In principle, buyers of a discount certificate are betting that the share will at least not rise significantly. The two derivatives on Grenke with different caps, which the Bafin employee traded eight times, were each launched on September 17th – after the allegations of manipulation became known. How many purchases and sales were involved is not recorded by the Bafin. It is also unknown whether the employee in question actively speculated with papers from Wirecard.
In view of the assumption that Bafin employees only became aware of the niche company Grenke in their private deals through the current allegations, Bayaz assessed the business as problematic towards Personal-Financial.com. “If employees of the supervisory authority can trade in shares of a company that is currently being screened by the Bafin, then that is absurd. A conflict of interest remains a conflict of interest, even if only a few cases are involved, ”said Bayaz, who also sits on the Wirecard investigative committee for the Greens. The previous regulations for employee transactions at the Bafin had negligently accepted problems “which can be expensive for the trust in and the practice of the supervision,” he added. “It is overdue that the rules are finally tightened so that there is not the slightest doubt about the integrity of the financial regulator in the future.”
Although the Bafin had always emphasized that insider trading by its officials was excluded by the internal reporting system, it had recently announced that it would tighten the guidelines for employee transactions. In the future, Bafin employees will generally no longer be allowed to trade papers from companies in the financial sector that are supervised by the authorities. In addition, Bafin is currently running a special audit of all deals made by its employees with shares and derivatives from Wirecard.
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