Hedge fund founder Sanjay Shah was accused of being the mastermind behind a "meticulously pre-planned" Cum-Ex trading scheme that defrauded the Danish government of £1.4 billion ($1.7 billion) at the start of London civil trial.
Danish tax agency Skat is suing dozens of traders and businesses in a bid to claw back the billions it was defrauded of through the controversial tax trading strategy that's roiled the European finance industry for years. Separately, Shah who founded Solo Capital Partners, is in the middle of a Danish criminal trial and faces years in jail if he's found guilty.
Cum-Ex was a tax-driven trading strategy in which a global network of bankers, lawyers and agents exploited loopholes on dividend payout laws across Europe to reap duplicate tax refunds. Roughly 1,800 people are still under investigation in Germany and a total of nine have been charged in Denmark.
Shah made fraudulent misrepresentations through his firm as part of its applications for a "refund" of dividend tax between 2012-2015, Skat's lawyers said in documents prepared for the yearlong trial. Shah "masterminded" the scheme with the help of brokers, lawyers and advisers to facilitate it. Shah has consistently maintained his innocence.
"The whole purpose of the arrangement was to enable these purported trades without anyone having to pay any money at all," Laurence Rabinowitz, Skat's lawyer, said Monday in court. "The reality is that steps taken by all participants were prearranged and in fact closely correlated to someone within the Solo group."
They alleged that the defendants identified eligible applicants for refunds, manufactured sham trading, made fraudulent applications and then concealed or laundered their proceeds.
The tax refunds were "facilitated by meticulously pre-planned and coordinated trading, which was specifically designed to involve no delivery of any shares or cash at any time," said lawyers for Skat in court documents.
Shah introduced many of his friends, family and associates to the trading strategy to get them involved — including short sellers, stock lenders and brokers. Among the key players, some were close friends from college, relatives of former Solo employees, or associates he had known "for years", according to Skat's court filings.
Shah is set to give evidence during the trial via a video link from Denmark where he was
"The complexity of the trade does not prove dishonesty," Nigel Jones, his lawyer, said. "He thought that Cum-Ex trading worked."
