IKB was an early casualty of a credit squeeze sparked by the collapse of the US market for high risk, or subprime, mortgages in August, and BaFin had been checking into whether people acted on knowledge of its distress before it was made public, according to the paper said.
The regulator said Tuesday that it had referred the case to prosecutors for criminal prosecution, the first time probes into the subprime meltdown have led to a criminal enquiry in the European market. An IKB spokesman declined to comment.
The specialist in lending to small- and medium-sized enterprises was bailed out in August and several times since by rescue packages drawn up in large part by the state-owned development bank KfW, which holds a major stake in IKB.
If insider trading is proven, which is very hard to do, it is typically punished by a fine or a maximum of a few years in jail, the Journal quoted a BaFin spokeswoman as saying.