Berlin prosecutors are pursuing a criminal investigation into Lars Windhorst almost a year after the German financier and football investor claimed to have settled “pending legal disputes” over the matter.
The prosecutors have been investigating potential breaches of the German banking act after a criminal complaint filed by Germany’s financial watchdog BaFin.
BaFin was concerned the 45-year-old may have engaged in banking activities without the required licences, a criminal act under German law carrying a potential punishment of up to five years in prison.
Windhorst tweeted last November that he had repaid €132.5mn in loans that he said “BaFin believes would have required a licence under the German Banking Act”, adding that “the repayment settles the pending legal disputes” with the regulator.
However, public prosecutors in Berlin told the Financial Times that “the investigation is ongoing and a conclusion of the matter is currently not yet in sight”.
BaFin declined to comment other than to say Windhorst “ran a deposit-taking business without the necessary regulatory approval” and unwound the operations at its behest.
A spokesperson for Windhorst told the FT that “BaFin notified us in writing that the probe against Lars Windhorst has been finished and the case has been concluded”.
Asked about the criminal investigation, which is separate from BaFin’s probe, the spokesperson said it would “also eventually be closed” as a consequence of the settlement with BaFin.
A person familiar with the investigation told the FT that this was “wishful thinking”, adding: “The criminal investigation is independent, open-minded and ongoing.”
The legal woes were triggered by the activities of Windhorst’s investment vehicle Evergreen Funding, according to people familiar with the matter. Evergreen was set up to buy back bonds from H2O, a €12bn French investment firm that poured client money into illiquid securities linked to Windhorst. French regulators later froze a series of funds at H2O over “valuation uncertainties” on their bond holdings.
In June 2020 Evergreen issued a €1.25bn bond, offering investors a hefty 12.5 per cent annual interest rate. The Luxembourg-based vehicle’s annual accounts for 2020 show it provided high-interest rate loans worth €272mn to Windhorst and held just €263.5mn of bonds on its balance sheet.
BaFin subsequently froze Evergreen’s bank account in Germany and notified criminal prosecutors in Berlin, where Windhorst’s holding company Tennor has offices.
A spokesperson for Windhorst said last year that the company was “absolutely certain” that all the BaFin allegations over potential illegal banking activities were without merit.
Windhorst has returned to the public eye in recent weeks after a public fallout with the management of Bundesliga football club Hertha Berlin, in which he owns a majority stake. The club has launched an investigation into allegations first reported by the Financial Times that he had hired corporate spies to try to force out the club’s president.