Fictitious investigation proceedings: Frankfurt Higher Regional Court issues temporary injunction against e-mail subscription trap operators and “investigative journalists”

05.07.2023 From daro

Cryptocurrencies such as Bitcoin, Ethereum and Bitcoin Cash are still the hot topic in the financial sector. New business models are firing the imagination of software experts, copyright and patent lawyers, economists and financial experts.

As in other areas, successful business models also attract soldiers of fortune and free riders. They are often targeted by more or less reputable journalists or other “admonishers” and “warnings” with their own dubious interests.

Warn and collect business model

This case concerns a German-speaking “financial influencer” domiciled in Spain who has been attracting attention for several years not so much with his expertise as with advertising for his paid newsletters, among other things.

In this context, he offers potential customers the prospect of becoming “rich” with his help at a price of almost €2,000 per year. The defendant operates this business model in collusion with a “publisher” based in Germany via various funnel sites.

Court-confirmed e-mail subscription trap operator

The subscription newsletter offers are so overpriced, non-transparent and deceitful that the Regional Court of Hamburg, in response to the defendant’s attempt to obtain a court ban against the designation, confirmed in reverse that it may be permissibly referred to as an “email subscription trap operator” (LG Hamburg, decision of 6.1.2020, Ref. 324 O 568/19).

Among other things, the defendant operates a website to advertise its subscription traps, on which he not only advertises his paid “get-rich-quick” recommendations, but also regularly publishes “warnings”. As a rule, these publications are not based on serious research or on the requirements of admissible suspicion-based reporting, as they – like the “reports” in question – only ostensibly serve to provide information or clarification. In reality, they regularly only serve to generate attention for the defendant’s “newsletters”.

Popular claim: “Authority/public prosecutor’s office is investigating”

As early as the middle of last year, the applicants realized that the defendant had apparently chosen their company as a vehicle for his machinations. After initially merely issuing a “warning” and his own assessment of their project as “dubious” and “questionable”, he suddenly began to claim on social media at the beginning of this year that the public prosecutor’s office was already investigating the case. It came as no surprise that there was no evidence of this, as such an investigation never existed.

Out-of-court appeals were unsuccessful

As the defendant did not want to take up the unbureaucratic offer to simply delete the unlawful publication and thus avoid costly legal action, a fee-based warning became necessary. As this – unsurprisingly – did not lead to the desired result either, an application for a temporary injunction was – once again – necessary.

OLG Frankfurt issues temporary injunction

After the Regional Court had still rejected the application, the Higher Regional Court of Frankfurt shared the opinion of the applicants that the defendant must refrain from making his statements due to a credit risk pursuant to Sections 1004 (1), 824 BGB (Higher Regional Court of Frankfurt, decision of 2.6.2023, Ref. 16 W 27/23, not final).

And this despite the fact that the defendant had not mentioned any specific company or specific company name in his posts – supposedly cleverly. The statement merely referred to the “system” XYZ. However, as both applicant companies have the element “XYZ” in their company name and the distribution of products relating to distributed ledger technology as their subject matter, the court considered it sufficient for persons to assume that the investigation proceedings are directed against the persons responsible for the applicants.

The fact that investigations are only conducted against natural persons is irrelevant

The court emphasized that the allegation on the Internet about a corresponding investigation by the public prosecutor’s office constitutes a factual allegation and is accessible as evidence. The Senate also did not accept the nasal argument of the defendant in his extensive out-of-court statements that only natural persons, not companies, can be the subject of criminal proceedings. The average reader with no prior legal training would not normally make this legal differentiation. Even if they did, they would understand the statement to mean that the responsible persons or the “heads” of the company are the subject of the investigation proceedings, which relate to the activity of the company, namely its system.

The statements were also likely to disparage the applicants in public opinion and jeopardize their economic reputation.

Defamation: Up to 2 years imprisonment is possible

Interestingly, the Higher Regional Court of Frankfurt explicitly states that the statement is such that it is capable of jeopardizing the economic reputation of the applicants and disrupting the relationship with their business partners and therefore constitutes defamation under Section 186 of the German Criminal Code (StGB). This not only has the procedural consequence that the person making the statement must prove or substantiate the truth of the factual allegations made. The defendant’s action is also punishable by imprisonment of up to two years or a fine.

The amount in dispute was set at EUR 40,000.00 for both the remission proceedings and the appeal proceedings. In the event of non-compliance, the defendant faces a fine of up to € 250,000 or up to six months’ imprisonment. The decision is not legally binding and was issued without an oral hearing, however, taking into account extensive extrajudicial submissions by the defendant. The companies will now also demand compensation for the damages incurred.

Excursus: Inappropriate frustration of service

Of course, the defendant is not only based in Spain due to the good weather. After his legal representatives had initially appointed themselves by submitting a power of attorney in the preliminary injunction proceedings and indicated their intention to defend themselves, they suddenly no longer wanted to know about this power of attorney after the order was issued and rejected a party service, which is necessary for the proper execution of the order, and claimed that they were not authorized to serve. The hope: The applicants now have to take the lengthy route of foreign service in Spain. But here, too, the defendant will fail: according to Section 87 ZPO, a lawyer remains appointed in a lawsuit until another lawyer is appointed. The bailiff has already been appointed in wise foresight.

Disclosure: LHR represents the applicants in the proceedings