Test case against EY over Wirecard bankruptcy begins

Frankfurt Damaged Wirecard shareholders are now taking on the auditor EY. On Monday, the Bavarian Supreme Regional Court (BayObLG) in Munich appointed the private investor Kurt Ebert as model plaintiff in the proceedings against EY (Az. 101 Kap 1/22) under the Investor Model Proceedings Act (KapMuG). This was announced by the BayObLG. This was the official starting signal for the KapMuG procedure, which was not welcomed by all investors.

Private investor Ebert bought Wirecard shares in February 2020 and is claiming damage of over 500,000 euros. He is represented by the law firm Mattil and the lawyer Elmar Vitt. In addition to EY Germany, the defendants in the KapMuG proceedings are the EY auditors Martin Dahmen and Andreas Budde as well as the Wirecard board members Markus Braun, Jan Marsalek and Alexander von Knoop.

The payment service provider Wirecard was considered a stock market prodigy for years. Despite recurring rumors of irregularities, investors remained in a buying mood for a long time – also because EY tested the numbers every year and the responsible financial regulator Bafin backed the company from Aschheim.

Investors were caught off guard when Wirecard suddenly announced in June 2020 that the balance sheet was missing 1.9 billion euros and that the group had to file for bankruptcy. The share price burst from over 100 euros to just a few cents.

A total of 1800 claims for damages against EY and Wirecard have been filed by private and institutional investors. But far more are affected. In the insolvency proceedings, investors, including large funds such as Vanguard, Blackrock and Union Investment, have already asserted claims of over nine billion euros.

>> Read here: Richter contradicts ex-Wirecard boss – growing doubts about Braun

The law firm Tilp, which is regarded as a pioneer of the KapMuG proceedings, had pushed for a model case early on because of the abundance and finally obtained the corresponding order for reference. The 1,800 pending lawsuits have been suspended. The advantage of the KapMuG: The lawyers of the private and institutional plaintiffs are in close contact and do not have to fight alone against the group of lawyers.

Criticism of KapMuG proceedings

Tilp had also suggested a model plaintiff. The court did not say why Mattil’s client was chosen. The fact that the law firm recently successfully concluded three KapMuG proceedings in the area of ​​the gray capital market – against Bayerische Vereinsbank, Commerzbank and Hannover Leasing – within four and two years speaks for Mattil.

For comparison: In the first KapMuG proceedings in German economic history, conducted against Deutsche Telekom, a settlement offer was only made after 20 years. Since then, KapMuG proceedings have had the reputation of being particularly long, which is why some lawyers have complained about the suspension of their individual lawsuits.

“The test case will certainly take some time and clarify many factual and legal issues,” admitted Peter Mattil to the Handelsblatt. But he is optimistic that the process can be carried out quickly and successfully.

>> Read here: Splitting of EY is further delayed – dispute over tax advisors

After the KapMuG has been publicly announced in the register of claims at www.bundesanzeiger.de – which will probably happen in the course of the week – other investors can submit claims in writing to the BayObLG for model proceedings within a period of six months. “The applicants must be represented by a lawyer,” emphasizes the BayObLG. Calculating the damage is not entirely trivial, so it is advisable to choose a law firm that specializes in capital market disputes.

Registration for the KapMuG is significantly cheaper than an individual lawsuit. If you want to claim damage of 18,000 euros, you pay almost 1000 euros for the registration. In the case of an individual lawsuit, which can still be filed by the end of the year, there is a cost risk of almost 6,000 euros in the first instance.

On the other hand, the vehicles used by investor protection groups are free because they are covered by litigation financiers who collect a commission if they are successful. The SdK is cooperating with Pinsent Mason, the DSW relies on a Dutch foundation and wants to sue EY Global as well as EY Germany.

All individual lawsuits are suspended until the outcome of the KapMuG. Whether this also applies to the lawsuit against EY Global is an open question.

More: Damages – Wirecard shareholders are looking for the best strategy against EY

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