A Trader Goes Short on Wirecard, Then Files a Criminal Complaint

(Bloomberg) -- A trader changed his position on Wirecard AG from long to short. Then he asked prosecutors and regulators to investigate the German fintech company.

The former investment bank employee, who can only be identified as Armin S., filed a criminal complaint with police and market regulator Bafin seeking an investigation into whether Wirecard violated EU market manipulation rules.

The request came just after an independent audit into Wirecard by KPMG criticized the payment processor for internal “shortcomings” and unwillingness by its third-party partners to contribute to the report.

Wirecard hired KPMG in October to look into its third-party partner business and its operations in India and Singapore following articles by the Financial Times that accused the company of accounting fraud in several countries. The German fintech had drip-fed parts of the report to the market, including a statement earlier this month that the accounting firm had not made any substantial findings of questionable accounting methods.

“The company repeatedly said that KPMG didn't find any wrongdoing, while they concealed that the auditor wasn't able to get the necessary documents from Wirecard itself,” Armin S. said in an interview.

The trader admitted in the complaint, however, that he changed his position on the company's shares on the same day as the KPMG report. In the filing, Armin. S. said that he bought Wirecard shares through January as “he believed in the company,” but on Tuesday he changed his position, buying derivatives that allowed him to profit from falling Wirecard stock prices.

Wirecard's press office didn't immediately reply to an e-mail seeking comment. A Bafin spokeswoman said she can't immediately comment.

The trader said in an interview that he isn't a “typical” short seller, who bets on a company's stock falling.

“I have been long on Wirecard for a long period and really made good money,” Armin S. said in an interview. “I believed what the company communicated and now we saw it wasn't based on facts. So when the report came out on Tuesday, I switched to short. And that has already worked well.”

The company's shares fell as much as 36% after the KPMG report was published before rebounding 4.9% Thursday. Activist investor Christopher Hohn called on Wirecard to remove Chief Executive Officer Markus Braun, putting additional pressure on the stock this week.

Wirecard, based in Aschheim near Munich, on Tuesday said “no incriminating evidence was found” in the KPMG report “for the publicly raised accusations of balance sheet manipulation.”

BNP Wins Dismissal of Suit Over $186 Million ‘Fat Finger' Error

This isn't the first time that Armin S. has made headlines. The trader sued French lender BNP Paribas SA over what he called a 163 million-euro ($177 million) “fat-finger” mistake on a transaction.

He lost a ruling in the case in Frankfurt and has appealed. He has also sued BNP in Paris.

“It angers me when I see that big players think they are above the law and can interpret the rules as they please,” Armin S. said. “The small trader is immediately being held accountable for the slightest issue because it's easy to get after him. I've seen that many times.”

Bafin spokeswoman Anja Schuchhardt declined to comment. Bafin has long been conducting a market manipulation probe into Wirecard and will also add the information from the KPMG report to its investigation, she said.