Wirecard\’s downfall is stirring an epic shareholder revolt in Germany

Like so many German retail investors, Fabian Schmidt saw Wirecard as a near can’t-miss stock opportunity. A 37-year-old resident anaesthesiologist, Schmidt trades stocks in his spare time as he looks to save up money to buy a bigger house for his growing family.

Schmidt went all in on Wirecard in May despite a series of news articles that again called into question the company’s finances. Short sellers and investigative journalists at the Financial Times, in particular, had been sounding the alarm that the finances of the fast-growing fintech just didn’t add up.

Schmidt though grew convinced the Dax 30-listed juggernaut, which at one point surpassed Deutsche Bank in market cap, was on the road to hitting its growth targets. The smooth and confident former CEO sold him.

“I found Markus Braun quite convincing,” Schmidt told Fortune. “He was saying the short-sellers are out to get us. They’re trying to profit off of us.

“‘We are a very stable enterprise,’ Braun said. ‘We are a member of the Dax, and we’ve been rated positively by our auditor, Ernst & Young.’”

What sealed it for Schmidt was a vote of confidence from BaFin, Germany’s Federal Financial Supervisory Authority, which oversees listed companies and financial firms. “Braun cited BaFin,” Schmidt said ruefully. “That meant a lot to me.”

Investors lost their shirts

Despite Tuesday’s rally, shares in Wirecard are down more than 90% since June 17.

Last week, the payment-processing specialist had to admit that the $2.1 billion that mysteriously vanished from its books probably never existed, sending shares crashing.

That’s when Schmidt bailed on the stock, losing thousands. But after seeing what happened next, he vowed not to walk away quietly.

On June 22, investigators stepped in to probe what role Braun and other executives might have played in the financial fraud. A day later Wirecard filed for insolvency protection.

Wirecard’s longtime auditors at EY are now feeling the heat too. In its defense, EY insists Wirecard pulled off an “elaborate and sophisticated fraud,” but that’s not enough to chill the controversy over how the firm missing the coverup in the first place.

Read more: If Ernst & Young auditors had done this one thing, they might have uncovered Wirecard’s $2 billion fraud years sooner.

In recent days, Germany’s regulators have been pulled into the scandal as well. From Brussels to Bonn, there are calls to overhaul the overseers.

A national reckoning

The fall of Wirecard has triggered a national reckoning in Germany’s investor community. By one attorney’s estimate, a record number of shareholders are expected to join in a class-action lawsuit against Wirecard—more than even the numbers who took Volkswagen to court during Dieselgate in the past decade.

One of the Wirecard litigants is Schmidt.

“BaFin is what really shocked me,” he grumbled. “They literally did nothing. I was as stupid as they were” to not check into the allegations of financial wrongdoing at the company. “But they should have looked closer. It’s their job. This is what makes me so angry. This is why I went to the law firm. ‘If you are organizing a big lawsuit,’ I told them, ‘then count me in.’”

BaFin did not respond to Fortune‘s requests for comment. Wirecard said in an email response it is “currently not making any further statements.”

According to Marc Schiefer, an attorney at the German lawfirm, TILP Rechtsanwaltsgesellschaft mbH, that’s spearheading the legal push against Wirecard, more than 30,000 shareholders have asked to join the lawsuit.

“Some people just lost their whole retirement savings,” he told Fortune. In recent days, TILP has expanded its legal claim to include current and former Wirecard board members, including Braun, and EY.

The audit firm maintains they were the ones who were misled.

For Schmidt, his big fight is to see changes in the way German regulators oversee the companies on their watch. “What makes this story so unique to me—the failure of regulators to do their jobs,” he says.

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