Hedge fund founder: Controversial tax trades were 'completely legal'

Sanjay Shah, the hedge fund founder accused of masterminding a Cum-Ex trading scheme that took £1.4 billion ($1.7 billion) from the Danish government, claimed he thought the transactions were "completely legal."

"I am — or at least, I was — a hardworking and highly successful entrepreneur," Shah said in London court documents filed by his lawyers. Shah, who set up Solo Capital Partners, believed that the Cum-Ex trading scheme was a "structure legitimately traded by international banks" and that "no external party considered otherwise." 

Along with dozens of traders and businesses, Shah is being sued by Danish tax agency Skat 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.

Christopher Pike/Bloomberg

While the U.K. civil case continues, Shah is in detention in Denmark in a criminal trial and faces years in jail if he's found guilty. Shah, who was arrested in Dubai in 2022 and extradited to Denmark last year, has consistently maintained his innocence. 

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. According to Skat, Shah introduced many of his friends, family and associates to the trading strategy to get them involved — including short sellers, stock lenders and brokers. 

Nigel Jones, Shah's lawyer, argued Skat was wrong to suggest that Shah "and a few close associates all got together to cook up the scheme." 

"What is wrong with coming up with an extremely clever scheme and concealing it from your competitors?" Jones said in court documents. These were "natural business responses and developments for a highly motivated, skillful, financial services entrepreneur" like Sanjay Shah.

Similarly, lawyers for Shah's former employees at Solo argued in court filings that they were "intelligent, thoughtful financial professionals with substantial experience in major investment banks and previously unblemished professional reputations" who "at no time" intended to "mislead Skat."

The London trial, which is scheduled to run for over 12 months, will see testimony from several traders, including Shah, as well as tax experts. Lawyers for Skat have argued that the entire process was a fraudulent misrepresentation. 

"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 at the start of the case. "The reality is that steps taken by all participants were prearranged and in fact closely correlated to someone within the Solo group."