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  • Michael N.

British trader on trial in Denmark for cum-ex tax fraud of over a billion Euros

The 2008 Financial Crisis left many individuals working in banks, especially traders, without jobs. Among them was British national Sanjay Shah, who was 38 years old at the time. Shah had amassed considerable experience working for esteemed banks such as Credit Suisse, Rabobank, and Morgan Stanley. Consequently, he ventured to establish his own hedge fund in London, named Solo Capital. This enterprise propelled him to astounding wealth, attracting celebrities and renowned singers like Prince and Ricky Martin to perform at concerts for his autism charity, which ceased operations in 2020. Nonetheless, Shah's fortune is mired in controversy, as he currently resides in Denmark under suspicion of committing tax fraud amounting to approximately 1.65 billion Euros. Between 2012 and 2015, massive tax fraud was orchestrated by Solo Capital in London and Dubai, targeting tax authorities in Norway, Belgium, and Denmark. Although Shah contends he exploited legal tax loopholes, another British trader associated with Shah confessed last February to participating in fraud within the cum-ex scandal.

The cum-ex scandal refers to a tax fraud scheme in Europe that has siphoned off a staggering 63.2 billion dollars from European treasuries. Interestingly, some countries, including the UK, Sweden, and those in Eastern Europe, reported no losses, while Germany, Denmark, and France were not as fortunate. Germany, in particular, bore the brunt of the scandal, losing a total of 36.2 billion dollars. To put this into perspective, if Germany's population is estimated at 80 million, it implies that every German effectively paid 450 dollars to an (as of yet undisclosed) cadre of immensely wealthy tax evaders. The German government's response to the scandal was notably sluggish, taking years to take decisive action against those implicated. The scheme involved investors and traders exchanging shares in such a way that it appeared to tax authorities there were multiple owners for the same shares.

This manipulation, occurring just before dividend payout dates, enabled traders to illicitly reclaim taxes at double the legitimate rate. The scam has been likened to "parents claiming child benefits for two or more children when there is only one child in the family."

After relentless efforts by the Danish tax authorities, Sanjay Shah was extradited to Denmark in December and arrested shortly thereafter. His trial commenced a few days ago in Copenhagen, with an anticipated sentence of approximately 12 years. Additionally, Denmark seeks to prosecute another eight individuals implicated in tax fraud, originating from both the UK and the US.

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