Insider trading: Prosecution makes serious allegations – Economy

The amounts at stake this Wednesday before the 12th Criminal Chamber of the Frankfurt Regional Court are dizzying. The former publishing manager Andreas T. is said to have earned a total of 24 million euros from 2017 to 2021 thanks to insider information on company takeovers with stock transactions. After deducting taxes and other costs, he is said to have still had a profit of around 14 million euros – a profit that would be difficult for ordinary small investors without access to unpublished takeover plans to generate on the stock market, especially in such a short time.

At least that’s how the Frankfurt public prosecutor’s office sees it, which accused the defendant of violating the ban on insider trading in twenty cases at the start of the trial on Wednesday. “He had information that was far more concrete than was known in the media, so he could easily calculate the price effects,” said Markus Weimann, head of the public prosecutor’s office for economic crime in Hesse. Weimann and his colleagues read out the indictment for more than an hour, while the defendant obviously listened attentively and with interest – he plans to comment on it shortly. The 48-year-old was recently in custody because the public prosecutor’s office had assumed there was a risk of absconding.

The banker had apparently been passing on information for many years

The process is likely to be followed in many banks and companies. Ultimately, it is one of the most spectacular cases of insider trading in Germany, if only because of the large sums involved, but also because of the question of what role a now deceased investment banker from the up-and-coming consulting boutique Perella Weinberg in London could have played as a tipster. There is also the legal question of when ongoing strategic considerations in companies fall into the category of insider information, the disclosure and use of which for stock trading is prohibited.

Insider trading occurs when someone has advance information that moves stock market prices and uses it to make money. Corporate takeovers are a classic example: If a competitor makes a takeover offer, the company’s share price often rises sharply. Anyone who knows about it beforehand and stocks up on warrants can make a lot of money. Anyone caught can face up to five years in prison. In the current case, the defendant is said to have used information about prominent corporate takeovers, specifically the energy company Uniper, the chemical company Covestro, the former Eon subsidiary Innogy, the lighting manufacturer Osram, the real estate group Deutsche Wohnen and the construction company Bilfinger. According to the prosecution, the investment bank Perella Weinberg advised “either the target company or the transferee” in almost all cases.

The accused is said to have received his information from a banker at Perella Weinberg in London, who in return is said to have even received a stake in a start-up. The banker is said to have passed on price-relevant information since 2006, when he was still working at Deutsche Bank, but this is out of date. Last year he took his own life shortly after a raid in London. It is unclear whether he passed on the information without an ulterior motive or for the purpose of insider trading. The accused Andreas T., in turn, is said to have involved his sister, his father and another person and also tried to conceal the transactions. While his relatives are no longer the focus of the investigation, another business partner will also be summoned to court shortly.

There have recently been some successful investigations into insider trading in the Frankfurt financial center. For example, a top fund manager from Union Investment had to answer in one case. However, the crime is generally difficult to prove. The authorities must prove beyond doubt that the accused were insiders at the time of the stock exchange deals and that they illegally exploited the information. In addition, investigators are not allowed to tap telephones if insider trading is suspected. The current investigation was triggered by a report from the financial regulator Bafin, which noticed the transactions and was able to substantiate the suspicion with the help of the stock exchange’s trading surveillance office. A year ago, the public prosecutor’s office, the Federal Criminal Police Office and the Bafin searched several buildings in Frankfurt, Munich and the Munich area and arrested the main suspect.