An insider trader in Germany has been ordered to repay nearly six times his profits by a German court.
A former senior fund manager who admitted large-scale insider trading has been sentenced to three-and-a-half years in jail and ordered by a Frankfurt court to repay almost six times the €8m in profits he made.
The order to seize €45m from the former fund manager, who worked at Union Investment, Germany’s third-largest asset manager, was made on Thursday by three professional and two lay judges at a district court following a three-day trial.
The sentence roughly matched the public prosecutor’s demands and comes just a few years after lawmakers had given courts greater leeway to seize assets of white collar criminals. Insider trading can be punished by up to five years in jail in Germany.
The €45m sum represents the aggregated trading volume of all the defendant’s illegal transactions, which he committed between April and September 2020 just as the pandemic erupted across Europe.
The presiding judge, Moritz Rögler, acknowledged that the defendant, who oversaw equity funds with €31bn in assets at Union, had confessed, co-operated with prosecutors early on and regretted his crimes.
However, Rögler pointed to the “perverse amount of money” at the core of the crimes and the fact that the fund manager exploited his senior position at Union. “You were not an intern who learnt about insider information by accident,” said Rögler.
The defendant last week admitted to 55 cases of insider trading, front-running buy and sell orders of blue-chip stocks executed on behalf of his employer. He used an undisclosed brokerage account at Germany’s largest online bank ING Germany, where he bought and sold highly leveraged derivatives aimed at retail investors.
The issuers of the derivatives and the bank had flagged suspicious trades to Germany’s financial watchdog BaFin, leading to his arrest. A BaFin employee on Tuesday scolded ING for its tardy reaction.
The married father of two told the court last week that he embarked on the insider trading after feeling “offended” by a smaller-than-expected pay rise in early April 2020.
His employer had persuaded him to take on more responsibilities, the defendant told the court, and promised he would be well rewarded. When this did not happen, he looked for “a different way of rewarding himself”, his psychiatrist, Helga Tafelmayer, told judges on Thursday.
She said that her client was highly intelligent and ambitious but shied away from conflict. As a result, rather than openly challenging his bosses on the pay rise, he instead took “an internal shortcut”. “He never really thought the whole situation through,” said Tafelmayer, adding that her client had “lost the plot”.
The defendant was not driven by the money itself — which he said he never touched — but by the feeling of validation that came with the large amounts of cash he was making.
The defendant’s lawyer, Sören Schomburg, a partner at Ufer Knauer law firm, called for a suspended two-year sentence, arguing that time in prison would threaten this client’s therapeutic progress and the relationship with his family. He also urged the court not to try to seize €45m, branding the decision “wrong” and “out of touch with reality”.
The 45-year-old defendant, who has left the financial industry, at present works 10 hours a week in a part-time job, earning €1,000 a month.
The judge acknowledged that the order to seize €45m could create “a feeling of unease” but argued that the court was obliged to follow the wording of the law. If the law was excessive, that “is a question which needs to be sorted out by the Federal Court of Justice, not by us,” he said.
A friend of the fund manager, who was occasionally tipped off and traded on the insider information on 19 occasions, was sentenced to a suspended jail term of close to two years and ordered to repay the aggregated trading volume of €3.3m.