Regulator probes Deutsche’s Alexander Schuetz about Wirecard trades

Germany’s top financial regulator is examining transactions by Deutsche Bank supervisory board member Alexander Schuetz linked to Wirecard, the now-defunct payments company that collapsed in a fake accounting scandal.

BaFin is conducting a preliminary assessment of Schuetz’s trading, including options on Wirecard shares around the time that SoftBank announced a plan to invest in the company in 2019, people familiar with the matter said, asking for anonymity in discussing nonpublic information. The SoftBank deal helped bolster confidence in the stock, which had come under pressure at the time from reports in the Financial Times alleging accounting irregularities.

A spokesperson for BaFin and a spokesperson for Schuetz declined to comment.

Schuetz, the co-founder of Austrian asset manager C-Quadrat, is already facing criticism for buying shares in Wirecard and then urging the company’s then-CEO, Markus Braun, to “finish” the FT over its critical coverage. Deutsche Bank chair Paul Achleitner told Schuetz in a phone conversation a few days ago that his wording was “unacceptable,” though Schuetz so far hasn’t signaled any intention to resign from the board, Bloomberg News has reported.

BaFin’s scrutiny of Schuetz’s trades is an informal fact-finding effort. When BaFin concludes such initial examinations, it generally decides whether to open an investigation into potential market abuse. Such probes can then result in penalties for the persons involved.

SoftBank’s planned investment, a $1bn wager involving convertible securities, boosted shares of Wirecard by as much as 12% when it was announced in April 2019. SoftBank later that year reduced its exposure as doubts about the payments company’s finances were mounting.

Schuetz’s company oversaw Chinese conglomerate HNA’s stake in Deutsche Bank and he subsequently joined the lender’s supervisory board in 2017. He remained on the board after HNA exited its stake, with his term scheduled to end in 2023.

BaFin has been slammed for failing to unearth what it has since called “massive fraud” at Wirecard. The regulator opened itself to criticism that it sought to protect the company by temporarily banning short sales on its stock in 2019. BaFin rejects that view, saying it had to act to protect the wider market. The watchdog has promised to help rebuild trust lost after the company’s collapse and is being given more powers as part of a wider overhaul of financial oversight in Germany.

Wirecard collapsed in June, becoming Germany’s biggest corporate scandal in recent memory. The company had been unprofitable for years and relied on fake transactions with overseas partners to cover up the fraud. Braun was arrested last year and has been in a jail near Munich since. His second in command is a fugitive.

Deutsche Bank has sought to distance itself from Wirecard both financially and in terms of reputation, something the German lender has worked to improve after paying billions of dollars in misconduct fines over the last decade. The bank said in December that Andreas Loetscher, the chief accounting officer who oversaw Wirecard audits when he was at EY, will temporarily step aside.

Bloomberg