[thomaskcr]

Not only that, they went after the short sellers who were writing about it publicly.

> Germany's pursuit of short sellers began when Perring’s previously little-known outfit, called Zatarra Research, published its report about Wirecard.

> In March, just three months before Wirecard’s collapse, prosecutors dropped their case against Perring after he agreed to make a donation of an undisclosed sum to a charitable organization.

Finance watchdogs are archaeologist organizations when it comes to fraud, they come in after the fraud has blown up and sift through the evidence to see what happened. Between that, they are busy going after people with too little money to defend themselves mostly.

https://www.yahoo.com/news/germany-long-lonely-campaign-batt...

[camjohnson26]

This is the true value of short sellers to the market. They were blowing the whistle on Wirecard for years before the regulators or company insiders did anything. The problem is they always look like fools while the company valuation goes up but then get vindicated all at once when it collapses, if it ever collapses.

[Traster]

This is the problem with short setlling - you don't need the company to be a fraud, you need it to be publicly outed as a fraud in a timeframe you can afford. This is what distinguishes 'The Big Short' and Bill Ackman with Herbalife. The mortgage crisis had a timeline for when the collapse would happen, that was the key. With Herbalife it was down to Ackman to convince the entire market that Herbalife wasn't a real business.

[dna_polymerase]

Herbalife still is a 'real' business. Ackman would like you to think otherwise but it still is. The whole thing might be a point against short sellers.

[AndrewBissell]

Another famous short seller, John Hempton, responded to Ackman's short with a very public investment case for going long Herbalife (he argues it's a kind of social club with supplement sales attached as dues). Short sellers definitely don't bat anything close to 1.000 though.

[Apocryphon]

Sounds like regulators have found Herbalife to be fraudulent after all, even if it hasn't affect it's stock price too much.

https://dealbreaker.com/2020/05/herbalife-fined-for-china-br...

[legulere]

They went after inside trading, as the release of the FT article seemed to be timed with the short sellers.

[gridlockd]

They didn't prosecute "short selling", they prosecuted market manipulation:

1. Get a large short position

2. Publish damaging information

3. Profit

It doesn't even matter if the information is true. If it is true, it is insider trading. If it isn't true, it is libel. Either warrants prosecution.

[sdinsn]

> If it is true, it is insider trading.

No, it's only insider trading if the information is based on insider (AKA private) information. Anything that can be derived from public information, even with a stretch, is also considered public.

[gridlockd]

I could have made myself clearer, I am talking about "damaging insider information". Publishing already published information isn't exactly news.

In this case, the alleged accounting fraud mentioned in the FT article was insider information.

[oh_sigh]

It depends where the knowledge came from - did it come from an insider, or was the accounting fraud discovered by poring over public records?

[KKKKkkkk1]

You don't understand what the word insider in "insider trading" means.

[gridlockd]

Are you sure you understand it? Insider trading is not limited to employees, that's a common misconception.

I don't know the German law on the matter, but I would wager that the prosecution was warranted, even when the court ends up determining that the charge doesn't hold.

[fluffything]

You definitely do not understand the word, because it is not limited to people, the word "insider" is limited to the information: is the information publicly available? If the answer is "no", then it is "inside" information, and trading on it is "insider trading".

These short sellers were trading on publicly available information. They just gave this information more publicity after getting their short positions, which is what you should do if you discover a market inefficiency that nobody else has discovered yet. That's your reward for making the market more efficient.

BaFin claims that this is insider trading was BS then and is BS now. They just don't understand how markets work, what their job is, and as a consequence did a poor job.

[gridlockd]

> These short sellers were trading on publicly available information.

We're talking about positions that were opened right before the FT article was published. The FT article included allegations by an insider, it wasn't only public information.

Granted, there was also publicly available circumstantial evidence that things were fishy at Wirecard.

Either way, these short sellers weren't convicted, that doesn't mean they shouldn't have been investigated.

[vonmoltke]

The earliest article I can find from the FT that references insider allegations of fraud is https://www.ft.com/content/03a5e318-2479-11e9-8ce6-5db4543da..., which was published almost three years after the report referenced in the Yahoo article. What article was this supposedly timed with?

[marta_morena_25]

Exactly, short-selling and writing a damaging article is kinda similar to Casino Royale... Just well, you don't try to explode a new airplane prototype while fighting off James Bond, you just write a damaging blogpost. The concept is the same though.