Frankfurt Administrative Court: BaFin must delete ‘warning message’
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By way of a temporary injunction, the Administrative Court of Frankfurt has obliged BaFin to remove an illegal report on a crypto company published under the heading ‘Unauthorised transactions’ (VG Frankfurt, Beschlusss v. 11.5.2020, Az. 7 L 452/20.F).
Claims for damages are currently being examined.
The Wild West begins just behind Bitcoin
From our legal advisory practice, we know that parties involved in crypto business models are often wrongly targeted by more or less reputable journalists or other ‘admonishers’ with their own dubious interests. Sometimes these dubious actors even succeed in feeding the competent supervisory authorities, such as the German Federal Financial Supervisory Authority (BaFin), with incorrect information and thus inducing them to take unlawful measures or reports.
This is exactly what happened to a company that was founded for the purpose of launching the operation or offering of certain crypto services and products and organising them internationally under its umbrella. Shortly after the company announced its market entry, a competitor, some crypto-affine news portals and a self-proclaimed ‘specialised journalist’ began to publicly discredit the project. In addition, the company was also smeared by the relevant supervisory authorities, in particular BaFin, with what later turned out to be false allegations.
BaFin publishes unlawful report
The authority then publicly claimed on its website that the company in question was not an institution authorised in accordance with Section 32 KWG and Section 10 ZAG and did not have a licence to conduct these transactions in the Federal Republic of Germany. However, BaFin had no legal basis for this. Nor had it properly consulted the company beforehand, as it would have been obliged to do.
At first glance, the inconspicuous report was grist to the mill of the above-mentioned ‘critics’, whose perfidious plan worked. They were able to use the report as a hook for further click-worthy ‘reporting’: They had always warned about it. Now BaFin is doing the same!
BaFin attempted to pre-empt the court decision of the Frankfurt Administrative Court by cancelling the licence
With the support of LHR, the company concerned has therefore filed an action with the Frankfurt Administrative Court against BaFin to have the notification removed and has applied for a temporary injunction (VG Frankfurt, Az. 7 L 452/20. F). Under pressure from the legal proceedings, BaFin immediately deleted the notification.
This was apparently intended to prevent a decision by the administrative court on the matter. We reported here:
Fortunately, this move did not lead to the success desired by BaFin. For understandable reasons, they would of course have liked to have prevented a decision on the merits by the court. Not least because those responsible had removed the report from its original publication site, but continued to make it publicly accessible in the so-called ‘BaFin Journal’ and refused to remove it there as well, the Administrative Court ultimately had to decide.
Frankfurt Administrative Court orders immediate removal of the notification
The Administrative Court of Frankfurt found clear words for BaFin’s notification and ordered BaFin to remove the notification in question immediately and completely from its website by means of an interim injunction dated 11 May 2020 (VG Frankfurt, Beschluss v. 11.5.2020, Az. 7 L 452/20.F), as this was an unlawful, defamatory and reputationally damaging measure for which there is no apparent basis for authorisation.
In addition to the claims for injunctive relief, there are extensive claims for damages, the amount of which the company naturally cannot yet determine precisely, but which will be considerable due to the seriousness of the allegations. BaFin must now publicly retract the unfounded allegations and ensure that all subsequent reporting by third parties, the illegality of which has now also been established, is also completely eliminated.
The ‘specialised journalist’ responsible for the false report will also have to reckon with consequences.
Lawyer Arno Lampmann from the law firm LHR:
The Administrative Court’s detailed and carefully reasoned decision shows once again that BaFin, as an authority, is bound by the law. It may only do what it is explicitly authorised to do by law. The supposedly good end does not justify the means, even when it comes to consumer protection. Especially as public notifications do not fail to have an effect and cause great damage, which – if they are unlawful – ultimately has to be paid for by the taxpayer and therefore again by the consumer who should actually be protected.
(Disclosure: LHR represented the applicant)
UPDATE 27.10.2020
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