Trial of British hedge fund trader accused of £1.4bn fraud begins

Sanjay Shah is one of nine people accused of defrauding Denmark through tax evasion and avoidance schemes.
Trial of British hedge fund trader accused of £1.4bn fraud begins
British businessman Sanjay Shah (L) is seen next to Danish police officers as he arrives at Kastrup Airport in Copenhagen on December 6, 2023.Getty Images

The fraud trial of a British hedge fund trader renowned for throwing extravagant parties and hosting stars such as Elton John at charity concerts has begun.

Sanjay Shah is one of nine British and US nationals accused of defrauding Denmark out of $1.8bn (£1.4bn) through major tax evasion and avoidance schemes.

The so-called cum-ex schemes were designed to exploit weaknesses in national tax laws and focused on huge share trades, which were carried out with the sole purpose of generating multiple refunds of a tax that had only been paid once.

Mr Shah, the founder of London-based hedge fund Solo Capital Partners, denies any wrongdoing.

He has been held in custody in Denmark since being extradited to the country following his arrest in Dubai in 2022.

Prosecutors alleged that Mr Shah, the main suspect in the case, fraudulently obtained a dividend tax refund from the Danish treasury via the trading schemes that flourished following the 2008 financial crisis, Reuters reported.

So-called cum-ex trades involved the sale of shares from one investor to another immediately before the payment of a dividend to shareholders (cum, or with, dividend), while they were delivered after the dividend date (ex-dividend).

The practice enabled both parties to claim refunds of withholding tax – even though the tax itself, charged on the dividend at source, would only have been paid once.

In order to maximise the potential gains, elaborate structures were built which allowed huge quantities of shares, often borrowed, to be passed in a circular manner between a number of different parties. The structures were designed to remove market risk and to disguise what was going on.

The scam began to gather momentum in Germany in the early 2000s, until the authorities there clamped down on the practice.

It later spread to other jurisdictions, notably Denmark. The UK was not a major target for the scam but many of the trades themselves were orchestrated from London.

The Denmark government has said cum-ex schemes have cost it more than 12.7bn Danish crowns ($1.8bn) between 2012 and 2015.

At the opening of Mr Shah’s trial, prosecutor Marie Tullin asked the court to confiscate assets belonging to him worth 7.2bn Danish crowns, which included a list of properties mostly in the UK.

He became renowned for throwing extravagant parties, while celebrities such as Prince and Elton John agreed to perform at concerts for an autism charity he founded.

Source: bbc.com

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