Hedge fund trader Shah behind US$1.8b Danish tax fraud, UK court told

Nevin Al Sukari - Sana'a - Court drawing of Sanjay Shah in a constitutional hearing at the Glostrup Court in Glostrup, Denmark, on Thursday 7 December 2023. Sanjay Shah, who is accused of participating in fraudulent share trading schemes, has been extradited to Denmark from Dubai. — Ritzau Scanpix pic via Reuters

LONDON, April 15 — British trader Sanjay Shah and his Solo Capital hedge fund orchestrated the bulk of an alleged €1.44 billion (RM7.3 billion) fraud against Danish taxpayers, a lawyer for the Copenhagen tax authority told a London court today.

Laurence Rabinowitz said most of the 17 sets of co-defendants in the complex case used a “cum-ex” dividend trading scheme established by Solo Capital, principally through entities in England, to extract money from Denmark’s tax authority Skatteforvaltningen (SKAT) in purported tax refunds.

“The Solo scheme accounts for around three quarters of the value of the SKAT claim ... That is where the pattern was established,” Rabinowitz told London’s High Court on the first day of a year-long civil lawsuit.

Shah, who was extradited from Dubai in December to face separate criminal proceedings in Copenhagen, denies wrongdoing. He says tax refunds were valid at the time, that Danish equities were an appropriate target and denies allegations the scheme was “cooked up” with a few close associates, court documents show.

Advertisement

The civil case in London, which is being held in parallel with legal proceedings in Copenhagen, the US and Malaysia, comes as Continental European countries such as Germany and Denmark lead sprawling investigations to try and recoup billions of euros paid out in similar schemes.

Cum-ex trading exploited tax systems of countries such as Denmark, Germany and Belgium after the 2008 credit crisis.

Banks, funds and investors swiftly dealt vast volumes of shares around dividend payout days, blurring stock ownership and prompting multiple claims for withholding tax rebates.

Advertisement

SKAT alleges that Shah, 53, and others meticulously pre-planned and coordinated trading to secure tax rebates, although they owned no shares in relevant Danish companies, received no dividends and paid no withholding tax between 2012 and 2015.

Shah argues he hired highly qualified independent people to fill important roles in Solo Custodians and associated companies, including structurers, traders, operations, IT experts, lawyers and compliance professionals, the court filings show.

“It must never be overlooked that, until 2023 in England, and not in Denmark, there was no statement of Danish tax law which provided that these trades were not valid and effective,” Shah’s lawyers wrote in the court filings. — Reuters