Sanjay Shah at the headland on the Palm Jumeriah in Dubai, United Arab Emirates
When Sanjay Shah lost his job during the financial crisis over a decade ago, he was one of thousands of mid-level traders suddenly out of work.
Shah was quick to return to the game, creating his own fund targeting loopholes in dividend tax laws. In just a few years he plotted a dramatic rise from the dark of the trading floor to raising up to $ 700 million and a real estate portfolio that stretched from Regent’s Park in his native London to Dubai. He ordered a 62-foot yacht and booked Drake, Elton John and Jennifer Lopez to play for an autism charity he founded.
Fueling his rise was what he claims to be legal, although ultimately controversial, Cum-Ex trades. Transactions like these have exploited legal loopholes across Europe, allowing traders to repeatedly reap dividend tax refunds on a single stake. The deals have proven to be hugely lucrative for those involved – except, of course, for the governments who have paid billions. German lawmakers have called it the biggest tax heist in history.
Denmark, which is trying to recoup some 12.7 billion crowns ($ 2 billion), or nearly 1% of its gross domestic product, says the whole business was a sham. His lawyers are seeking access to the bank documents they keep will prove this point. Authorities have now frozen much of Shah’s fortune and he is carrying out criminal prosecutions and investigations in several countries. His lawyers told him he would be arrested if he left the Gulf city for Europe, although he has yet to be charged.
But in a series of recent interviews from his $ 4.5 million Dubai home, Shah was unrepentant.
“Bankers have no morals,” the 50-year-old said on a video call. “Hedge fund managers, etc., they have no morals. I made money legally.”
“Authorized”
Shah and the company he created – Solo Capital Partners LLP – are central figures in the Danish Cum-Ex scandal, in which he said his company helped investors sell shares quickly and demand multiple repayments on taxes on dividends.
Authorities have polled hundreds of bankers, traders and lawyers in several countries as they tried to account for billions of euros in taxpayer funds they say were raised. But Shah says he became a “scapegoat” for figuring out how to legally take advantage of the tax code’s obscure loopholes that allowed Cum-Ex exchanges, named after the Latin term for “Sans-Sans”.
“Prove that any law has been broken,” Shah said. “Prove that there was fraud. The legal system allowed it.”
Danish tax agency Skat claims it has frozen up to DKK 3.5 billion of Shah’s assets, including a $ 20 million London mansion, in a sprawling lawsuit against the former banker and his alleged associates.
The agency did not see “any evidence to support that real stocks were involved in the transactions relating to the repayments of dividends collected from the Shah’s universe,” he said in a statement. “It looks like paper transactions unrelated to actual stock ownership.”
Shah still collects around 200,000 pounds ($ 250,000) a year from renting out his properties, he said, less than half of what he had before Covid-19 arrived.
The former trader faces additional heat in Germany, where prosecutors are probing him as part of a nationwide dragnet that targets hundreds of suspects in the financial sector.
Feel robbed
In Denmark, the case against Shah has sparked public anger. The country, which is in the midst of an economic recession caused by the coronavirus, claims to have been robbed.
“In a country like Denmark, and especially during the Covid-19 era, this is of tremendous importance,” said Alexandra Andhov, professor of law at the University of Copenhagen. The country’s tax authorities have already dealt with cases of suspected fraud, but “not in the amount of $ 2 billion,” she said.
Shah appeared at ease and upbeat while explaining how he would be arrested if he tried to return home to London. Married, a father of three and based in Dubai since 2009, Shah has spent the past five years engrossed in legal papers and talking to his lawyers, he said. To the authorities who are trying to extract him from his exile, he has a piece of advice: know your tax code.
Sanjay Shah walks past the Atlantis Hotel on the Palm Jumeriah in Dubai, United Arab Emirates
“It’s very nice to put someone’s face on the front page of a newspaper and say ‘Look at this guy who lives in Dubai, sitting on the beach everyday sipping a Pina Colada while you are broke and you don’t have a job, ‘he said. “I would say look at your legal system.”
First steps
Shah isn’t the only person trapped in the European Cum-Ex scandal. German prosecutors have been more aggressive than their Danish counterparts and have already charged more than 20 people. In a landmark lawsuit earlier this year, two former UniCredit SpA traders were convicted of aggravated tax evasion.
One of them, Martin Shields, told the Bonn court that while he had made millions from Cum-Ex, he now regrets his actions.
“Knowing what I know now, I wouldn’t have gotten involved in the Cum-Ex industry,” said Shields, who avoided jail time for cooperating with the investigation.
Ten years ago, Cum-Ex offerings were very popular in the financial industry. Shah says he picked up on the idea during his years as a London trader for some of the world‘s biggest banks.
The son of a surgeon, Shah dropped out of medical school in the 1990s and turned to finance. He first observed traders exploiting dividend taxes at Credit Suisse Group AG in the early 2000s, a strategy known as dividend arbitrage. Will Bowen, a spokesperson for the Swiss bank in London, said that “the lawsuits mentioned concerned a period after Sanjay Shah worked at Credit Suisse”.
Shah did not fully embrace Cum-Ex until he was hired by Amsterdam-based Rabobank Group several years later as the financial crisis began to plague the industry. Rishi Sethi, a spokesperson for Rabobank, declined to comment on the former employees.
Great ambitions
After being fired, Shah says he received offers from several brokerage firms including profit sharing. But that wasn’t enough for him, so he started his own business.
“I don’t want to share,” he said. “I want to do the whole thing.”
This ambition was commemorated in the name Shah chose for his company: Solo Capital Partners.
Shah said he was around half a million pounds when he started Solo. In half a decade, his net worth would soar to many multiples of that. As he recalls, JPMorgan Chase & Co. also played a central role in helping him get started, as they were the company’s first custodian bank. Patrick Burton, a spokesperson for the New York-based bank, declined to comment.
The plan Shah allegedly orchestrated was daring. A small group of agents in the UK wrote to Skat between 2012 and 2015, claiming to represent hundreds of foreign entities – including small US pension funds as well as companies in Malaysia and Luxembourg – who had received dividends from Danish shares and were entitled to a tax refund. Satisfied with the proof they have received, the Danes say they have handed over some $ 2 billion.
Luxury homes
But most of the money, the authorities say, went straight into Shah’s pockets. The agents and hundreds of foreign entities had simply been part of an elaborate network he created with a series of dizzying “dummy transactions” set up to generate illicit reimbursement claims, according to the country’s statement to the courts. UK courts.
As of January 2014, over $ 700 million is believed to have landed in Shah’s accounts. He channeled his wealth into property across London, Hong Kong, Dubai and Tokyo, Shah said, amassing a wallet he put in around £ 70million. He bought a 36-foot yacht for $ 500,000 in 2014 and called it Solo before switching to a $ 2 million, 62-foot model, the Solo II.
Shah’s lawyers said in his latest filing in the London lawsuit last month that Solo – who went into administration in 2016 – provided “clearing services for clients to engage in trading strategies. legal and legitimate which have been carried out at all times in accordance with Danish law. “
They said dividend arbitrage trading is a widely known and “very legitimate” trading strategy. Shah’s lawyers are also challenging Denmark’s jurisdiction to pursue his claim in English courts.
It has been five years since Shah learned he was facing a criminal investigation, when the UK’s National Crime Agency raided Solo’s offices following advice to UK tax authorities from the head of company compliance.
Slightly bored
His lawyer at the time, Geoffrey Cox, told him in 2015 that he had nothing to worry about and that it would all be over soon, Shah said. Cox, who would go on to become the UK’s attorney general and play a pivotal role in various Brexit crises last year, declined to comment.
Sanjay Shah’s lawyer Geoffrey Cox has been central to various Brexit crises last year
But instead, Shah’s legal troubles are just beginning. A massive three-part civil lawsuit covering Skat’s allegations against Shah will begin in London next year. The charges are also at the heart of a large US civil case targeting other participants in the alleged scam.
Criminal investigations in Germany and Denmark continue to boom. While Shah said he had not been contacted by the UK’s Financial Conduct Authority, the watchdog said in February he was investigating “substantial and suspected abusive equity transactions in the markets of London “linked to Cum-Ex systems. A Dubai court dismissed Denmark’s lawsuit against Shah in August, though it is appealing the ruling.
Back in Dubai, Shah said the ongoing saga was starting to wear him down.
“It was quite nice spending time with the kids and the family, but now where I am I’m bored and fed up,” Shah said. “It’s been five years. I don’t know how long it will take for things to end.”
(Except for the title, this story was not edited by GalacticGaming staff and is posted from a syndicated feed.)
