Beware of Phone Instructions from Superiors! – CEO Fraud: When the Boss’s Voice Becomes a Trap

A recent, not yet legally final ruling by the Cologne Regional Labor Court (LAG Köln, 31 July 2026 – 8 SLa 603/25) illustrates the financial risks that senior executives can personally bear in connection with cyber and social engineering attacks.

The facts: An employee holding the position of “Head of Global Treasury” at an international industrial company initiated nearly 60 wire transfers totaling more than EUR 50 million within just 25 days. The transfers were triggered by fraudsters who first used caller ID spoofing and later a private messenger number to impersonate his direct superior. At no point did the employee personally verify the instructions with his actual superior, even though he himself had taken part in an awareness campaign on precisely this type of fraud only a few weeks earlier.

The Cologne Regional Labor Court upheld both the extraordinary termination and the employee’s full liability for damages on grounds of gross negligence. Notable is the court’s reasoning on the limitation of liability: in the court’s view, a D&O insurance policy financed by the employer excludes any privilege under the principles of limited employee liability, because it protects the employee economically in a manner comparable to liability insurance. In any event, the underlying rationale for limiting liability in cases of gross negligence no longer applies once such insurance exists and thereby rules out the risk of the employee’s financial ruin.

Practical note: The decision marks a significant development in the case law on limited employee liability and is likely to have considerable practical relevance, particularly for executives with signing authority in treasury and finance functions. Companies should review their four-eyes principles and internal approval processes; executives should be aware of the potential personal liability risks – even where D&O coverage exists. The decision is not yet legally final; an appeal is pending before the Federal Labor Court (BAG) under case number 2 AZR 164/26. We will report on further developments.