Wednesday, October 21, 2020

Grenke threatens legal action against short seller over alleged fraud, money laundering

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German financial services provider Grenke said Thursday that it’s considering taking legal action against a short seller that published a damning report on the firm.

Fraser Perring of Viceroy Research released a 64-page report on Grenke this week alleging the company of market manipulation, money laundering and fraud.

“The board of directors and supervisory board continue to regard all these accusations as unfounded,” Grenke said in a statement. “Grenke is currently considering taking legal action against Viceroy Research.”

Grenke said it has convened a task force to deal with the detailed rebuttal of the accusations. It said executives from the company including founder Wolfgang Grenke and Chief Executive Antje Leminsky will comment on the accusations during an investor call on Friday.

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BaFin, the German financial regulator, told CNBC it was looking into the allegations of market abuse. The regulator said its probe will look to establish whether Grenke tried to manipulate markets.

Perring on Grenke

“I think it’s a widespread mentality that they do as they want and they aren’t accountable to anyone,” Perring told CNBC’s “Street Signs Europe” on Thursday.

“The reality is, they aren’t disclosing the M&A strategy, which is either for corporate enrichment for directors, or it’s hiding fake cash. Come out and tell us.”

Perring, who admits he has shorted Grenke’s stock, claimed almost 7,000 companies had been scammed across the U.K. and Australia by Grenke.

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He added: “The company isn’t a widespread criminal enterprise that I know of yet. But they certainly bank for criminals and scams, and they lend to scammy resellers.”

Asked if he thinks he is acting ethically and legally, Perring said: “We always operate legally … we’re fully accountable.”

“The worst part is the small and medium businesses are being impacted by predatory practices. So, if we don’t make a stand, who will?”

Grenke strongly rejects all the claims in the report. Shares of the firm rose 33% on Thursday after two days of heavy falls following the report’s release.

Founded by Wolfgang Grenke in 1978, Grenke employs 1,700 employees across 32 locations worldwide. The company, headquartered in the spa town of Baden-Baden in southwestern Germany’s Black Forest, mainly provides banking services to small and medium-sized firms.

Viceroy Research raised the alarm on German electronic-transfer company Wirecard in 2016 with the now famous “Zatarra Report.”

Founded in 2016, Viceroy Research rose to fame in 2017 after it published a report on accounting irregularities at South African retail giant Steinhoff that led to a share collapse.

In November 2018, South Africa’s central bank governor claimed that Viceroy Research had profited “unethically” from its reports, according to Bloomberg. The company’s “About” section on its website doesn’t give much away, describing the firm as “a group of individuals that see the world differently.”

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