British hedge fund trader faces Allegations of $1.8 Billion fraud

The trial has begun for a British hedge fund manager known for hosting lavish parties and charity events featuring celebrities. Sanjay Shah stands accused, along with eight other British and American citizens, of defrauding Denmark of $1.8 billion through a complex tax avoidance scheme.
Prosecutors allege Shah and his co-defendants exploited loopholes in national tax laws using “cum-ex” schemes. These schemes involved rapid-fire trading of shares specifically designed to generate fraudulent tax refunds.
Shah, founder of London-based Solo Capital Partners, maintains his innocence. He has been detained in Denmark since his extradition from Dubai in 2022.
Prosecutors are building their case against Sanjay Shah, the alleged mastermind behind this elaborate tax scheme. They claim Shah exploited “cum-ex” trading to illicitly claim dividend tax refunds from the Danish treasury. These schemes gained traction following the 2008 financial crisis.
Here’s how cum-ex trades worked: Shares were rapidly sold between investors just before a dividend payout (with, or “cum” dividend). However, the actual delivery of the shares happened after the dividend date (without, or “ex” dividend). This allowed both buyer and seller to claim tax refunds – even though the tax itself, deducted from the dividend initially, had only been paid once.
To maximize profits, these schemes involved complex structures. Large quantities of shares, often borrowed, were circulated rapidly between multiple parties. This intricate design aimed to eliminate market risk and mask the true nature of the transactions. Through this scheme, both parties involved were able to get tax refunds for the same dividend, essentially claiming a tax that was only paid once.
The “cum-ex” scam originated in Germany’s early 2000s financial scene, but German authorities eventually shut it down. The practice then migrated to other countries, with Denmark becoming a prime target. Though the UK wasn’t a major victim, many of the fraudulent trades were orchestrated from London.
Danish authorities estimate the cum-ex schemes cost their treasury over 12.7 billion Danish crowns ($1.8 billion) between 2012 and 2015. In the opening arguments of Shah’s trial, prosecutor Marie Tullin requested the court seize 7.2 billion Danish crowns worth of his assets, primarily consisting of properties located mostly in the UK.
Despite facing these serious charges, Shah was previously known for hosting lavish parties. He even secured celebrities like Prince and Ricky Martin to perform at charity concerts held by an autism foundation he established.