Legal

London Judge Dismisses Fraud Case Against Wirecard

Wirecard

After weeks of relentless headlines on the collapse of Wirecard, the High Court of Justice in London handed the German payments company a victory on Wednesday (July 15), the Financial Times (FT) reported.

Judges dismissed a civil suit that alleged Wirecard of fraud weeks after the company filed for insolvency in a Munich court.

The lawsuit was brought by two former minority shareholders in Hermes India, the Indian high fashion manufacturer. They alleged Wirecard defrauded them when they sold their shares to the Mauritius Fund at a 36 million euros ($41 million) valuation. The pair argued Wirecard knew the lower price paid for the shares six weeks before it agreed to buy Hermes for 326 million euros ($372 million), FT reported.

But Judge Ross Cranston ruled the case was unlikely to succeed because Wirecard did not know the price at which Hermes was sold to Mauritius.

If Wirecard had done so, Cranston wrote, “it would most likely have used it to negotiate on price, but it did not do that, paying what it did because of its assessment of what was needed to gain the strategic access Hermes provided to the Indian market,” according to FT.

The ruling also noted due diligence was conducted by two law firms, London-based Osborne Clarke and BTG Legal in Mumbai on behalf of the plaintiffs, FT reported.

“To my mind it is inherently improbable that Wirecard would have joined a conspiracy when reputable lawyers were to conduct detailed due diligence,” the judge wrote, according to FT.

The judge also found that the involvement of the Mauritius’ Emerging Markets Investment Fund (EMIF) was not a reason to suspect fraud.

“As a reputable law firm, they would have investigated EMIF’s position and been satisfied as to matters such as EMIF’s beneficial ownership, compliance with money-laundering and terrorist financing laws, and the absence of tax and other fraud,” Cranston wrote, FT reported.

Still, this is not the end of troubles for Wirecard.

Former CEO Markus Braun and Wirecard executive Oliver Bellenhaus face charges for their alleged role in the massive worldwide fraud case enveloping the company. Wirecard’s former chief operating officer, Jan Marsalek, is being sought by authorities in several countries.

The European Securities and Markets Authority (ESMA), the European Union’s (EU) financial watchdog, plans to examine how German regulators handled oversight of Wirecard.

Additionally, Wirecard may have misled the FinTech community about its partnerships with blue-chip companies. While Wirecard touted deals with SAP SE, Zurich Insurance Group and SoftBank Group Corp., some of those partnership announcements were misleading or publicized without the agreement of the companies.

——————————

New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.

TRENDING RIGHT NOW