1. Get a large short position
2. Publish damaging information
3. Profit
It doesn't even matter if the information is true. If it is true, it is insider trading. If it isn't true, it is libel. Either warrants prosecution.
No, it's only insider trading if the information is based on insider (AKA private) information. Anything that can be derived from public information, even with a stretch, is also considered public.
In this case, the alleged accounting fraud mentioned in the FT article was insider information.
I don't know the German law on the matter, but I would wager that the prosecution was warranted, even when the court ends up determining that the charge doesn't hold.
These short sellers were trading on publicly available information. They just gave this information more publicity after getting their short positions, which is what you should do if you discover a market inefficiency that nobody else has discovered yet. That's your reward for making the market more efficient.
BaFin claims that this is insider trading was BS then and is BS now. They just don't understand how markets work, what their job is, and as a consequence did a poor job.
We're talking about positions that were opened right before the FT article was published. The FT article included allegations by an insider, it wasn't only public information.
Granted, there was also publicly available circumstantial evidence that things were fishy at Wirecard.
Either way, these short sellers weren't convicted, that doesn't mean they shouldn't have been investigated.