The European Public Prosecutor’s Office has opened an investigation into InnoEnergy, the EU-backed clean technology investor that has received €760 million in public funds since 2010 through the European Institute of Innovation and Technology.
The probe, triggered by a complaint filed in March by Swedish entrepreneur Lars Wallden, examines allegations of financial irregularities and VAT fraud at the Netherlands-based company and its Spanish subsidiary. The investigation arrives at a moment of compounding institutional pressure for InnoEnergy, which has faced a series of damaging findings about the credibility of its reported impact metrics and its executive compensation practices.
InnoEnergy operates as a Knowledge and Innovation Community under the EIT framework, a legal designation that carries an explicit public interest mandate: to advance European innovation, bridge business, research, and education, and support the development of portfolio companies. That mandate is the justification for the €760 million in EU funding it has received over 15 years. It is also the standard against which the EPPO investigation, and the conduct that allegedly prompted it, will be assessed.
The Wallden Case and What It Alleges
Wallden’s company, Northstar Telemetrics, was among the first startups to receive support from InnoEnergy under a business creation service agreement signed in 2011. The company was developing an optical reader for electricity, water, and gas meters, an analogue alternative to smart metering infrastructure. InnoEnergy agreed to provide coaching and access to office space in Spain, where Wallden was then based.
The relationship deteriorated during contract renegotiations in 2013, when InnoEnergy proposed a new agreement containing a penalty clause of €125,000 applicable only against Wallden in the event he disclosed confidential information. No equivalent penalty applied to InnoEnergy. Wallden rejected the terms and submitted counter-proposals in 2014. Negotiations collapsed, and InnoEnergy pursued legal action in Spain, alleging breaches of contractual obligations and non-contractual liability.
A Spanish court in 2016 rejected the contractual claim but ruled in InnoEnergy’s favour on the non-contractual liability count, finding that Wallden had used delaying tactics and ordering him to pay nearly €200,000 in damages. When the sum remained unpaid by November 2021, a lawyer acting for InnoEnergy applied to have Wallden’s assets seized for €250,000, including interest and execution costs. Wallden told Follow the Money that he had left Spain in 2017 before the enforcement order could be carried out and that he lacked the financial means to pay following accumulated legal defence costs.
In his EPPO complaint, Wallden reported that before InnoEnergy initiated the legal proceedings, it had instructed him to issue invoices to InnoEnergy for services that had previously been paid by Northstar Telemetrics, as though his company had delivered those services to the investor rather than the other way around. He characterised this as an instruction to generate false invoices and, in his view, a potential misappropriation of EU funds. He also described InnoEnergy’s subsequent legal action as whistleblower retaliation.
InnoEnergy has stated it is not aware of any EPPO investigation involving the company and is unable to comment. It confirmed that the Spanish courts upheld their position and said it remains in dialogue with Wallden. A separate person with knowledge of the probe confirmed to Follow the Money that EU prosecutors are actively investigating both the Dutch parent and the Spanish subsidiary.
A Pattern of Unverified Claims
The EPPO investigation does not exist in isolation. Follow the Money’s prior reporting established a pattern of questionable performance claims by InnoEnergy that bear directly on how the institution has accounted for its use of public funds.
InnoEnergy has asserted that it has trained more than 100,000 people to work in Europe’s battery industry. That figure did not withstand scrutiny. The reporting found the methodology underlying it to be unreliable and the total not supportable by verifiable evidence. Separately, the organisation published an estimate that its portfolio companies would collectively reduce greenhouse gas emissions by 2.3 gigatonnes of CO2 equivalent by 2030. Independent experts consulted by Follow the Money described the figure as unrealistic. For an organisation whose mandate is defined by public benefit and whose funding is drawn from EU tax revenues, the inability to substantiate headline impact claims is not a secondary concern. It goes to whether the public purpose requirement attached to its KIC status is being met.
The executive compensation issue adds a further layer. InnoEnergy’s top executives received substantial bonuses, including during years in which the organisation’s financial performance was at its worst, under a system that external experts warned could create incentives for excessive risk-taking. The combination of opaque impact reporting and performance-independent bonus structures is a governance configuration that would attract regulatory attention in any publicly funded institution. In an entity operating under a public mandate with €760 million in EIT funding, it is more acute.
What the EPPO Probe Means for EIT Oversight
The EIT is the European Union’s primary instrument for funding knowledge and innovation communities, of which InnoEnergy is one of nine. The EIT’s own accountability framework requires KICs to demonstrate impact against defined targets in exchange for continued funding. If the EPPO investigation establishes that InnoEnergy misused EU funds or engaged in fraudulent practices, it will raise questions not only about InnoEnergy’s institutional management but also about the adequacy of EIT oversight mechanisms over its grantees.
The EPPO itself was established in 2021 specifically to investigate and prosecute crimes affecting the EU’s financial interests, including fraud, corruption, and misappropriation of EU funds. Its decision to open a formal investigation based on Wallden’s complaint, following a review that determines there is a sufficient basis to proceed, is a meaningful threshold. The EPPO carries prosecutorial authority in 22 EU member states and can coordinate asset seizure, document recovery, and witness examination across national boundaries. That institutional capacity distinguishes an EPPO investigation from a national-level regulatory complaint.
InnoEnergy’s response strategy of simultaneous silence on the investigation and continued enforcement of the Spanish court judgment against Wallden creates an uncomfortable optics problem. In March, the company’s new CEO and CFO sent Wallden a letter indicating willingness to withdraw the enforcement proceedings, but conditioned on Wallden agreeing not to initiate further legal action or seek media attention. Wallden declined. The attempt to trade withdrawal of enforcement for a media silence commitment, in a context where Wallden had already filed an EPPO complaint, is the kind of institutional conduct that regulatory investigators tend to find instructive.
The EIT has not publicly commented on the investigation. Its funding relationship with InnoEnergy, and the degree to which the impact claims it has accepted from the KIC have been independently verified, will be among the questions that the EPPO probe is likely to surface, regardless of whether the investigation ultimately results in prosecution.
