A German investment firm pursuing damages related to the Wirecard scandal has been ruled by the Federal Court of Justice (BGH) not to be a “simple” insolvency creditor, significantly impacting its prospects of recouping losses from the collapsed payment processor’s remaining assets. The landmark decision, delivered Thursday, prioritizes the claims of standard creditors over the investment firm’s capital markets-related compensation demands, effectively pushing its recovery potential to near zero.
The investment firm acquired and subsequently resold Wirecard shares on the secondary market between 2015 and 2020, retaining approximately 73,345 shares at the time of Wirecard’s collapse. The company alleges that Wirecard misrepresented its business model and financial standing, actions that directly contributed to its investment losses. Had the firm been aware of the underlying deception, it contends, the shares would never have been purchased.
Lower courts initially ruled against the firm’s claim, with the Regional Court dismissing both the claim and counter-claim. The Higher Regional Court subsequently rejected the defendant’s appeal in a partial judgement, while issuing an interim ruling acknowledging the claim’s admissibility and the firm’s right to pursue its compensation requests as insolvency claims. The defendant’s final appeal, allowed by the Higher Regional Court, successfully challenged this earlier finding.
The BGH’s ruling establishes a crucial precedent, clarifying that these capital markets-related claims, intrinsically linked to the identity and role of a shareholder, are subordinate to the claims of standard insolvency creditors during corporate bankruptcy proceedings. This effectively creates a hierarchy of claims, leaving the investment firm, along with many other shareholders, largely unprotected in the distribution of the limited remaining assets.
With approximately €15.4 billion in claims filed against the Wirecard insolvency estate, yet only €650 million currently available, the investment firm’s chances of receiving any substantial recovery appear increasingly remote. The decision raises concerns about the vulnerability of institutional investors in similar circumstances and could trigger a broader examination of investor protection measures within German financial markets, particularly regarding claims arising from corporate deceptions of this magnitude. Critics argue the ruling reinforces a systemic bias favouring creditors over shareholders in cases of widespread accounting fraud and corporate failures, potentially discouraging investment in German equities and hindering the sector’s overall health.
