NEW DLEHI: When Sanjay shah lost his job during the financial crisis more than a decade ago, he was one of thousands of mid-level traders who were suddenly out of work. Shah was soon back in the game, establishing his own fund targeting loopholes in dividend tax laws.
In a few short years, he charted a dramatic rise from the darkness of the trading floor to amassing as much as $ 700 million and a portfolio of properties that stretched from Regent’s Park in his native London to Dubai. He commanded a 62-foot yacht and hired Drake, Elton John, and Jennifer Lopez to perform for an autism charity he had founded.
Fueling his rise was what he contends was legal, albeit ultimately controversial, Cum-Ex Operations. Transactions like these took advantage of loopholes across Europe, allowing traders to get dividend tax refunds repeatedly on a single share hold. The deals were hugely lucrative for those involved, except, of course, for the governments that paid out billions. German lawmakers have called it the biggest tax heist in history.
Denmark, which is trying to recoup some 12.7 billion kronor ($ 2 billion), or about 1% of its gross domestic product, says the entire venture was a sham. Her attorneys seek to gain access to the bank records they keep to prove that point. Authorities have now frozen much of Shah’s fortune and he is fighting lawsuits and criminal investigations in several countries. His lawyers have told him that he will be arrested if he leaves the Gulf city for Europe, although he has not yet been charged.
But in a series of recent interviews from his $ 4.5 million home in Dubai, Shah had no regrets.
“Bankers have no morals,” the 50-year-old said in a video call. “Hedge fund managers, etc., have no morals. I made the money legally. ”
‘Permitted’
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 claim multiple dividend tax refunds.
Authorities have been investigating hundreds of bankers, merchants and lawyers in various countries as they attempt to account for the billions of euros in taxpayer funds that they say were harvested. But Shah says they are making him a “scapegoat” for figuring out how to legally profit from the dark loopholes in the tax code that allowed Cum-Ex trading, named after the Latin term for “Con-Sin.”
“Show that any law was violated,” Shah said. “Prove that there was fraud. The legal system allowed it. ”
The Danish tax agency, Skat, says it has frozen up to DKK 3.5 billion of Shah’s assets, including a $ 20 million mansion in London, as part of an expanding lawsuit against the former banker and his alleged partners.
The agency has not seen “evidence to support that the actual stocks were involved in the transactions related to the redemptions of claimed dividends in the Shah universe,” it said in a statement. “They look like paper transactions with no connection to any actual stock holding.”
Shah still earns around 200,000 pounds ($ 250,000) a year from renting his properties, he said, less than half of what he was getting before Covid-19 hit.
The former trader faces additional pressure in Germany, where prosecutors are investigating him as part of a national network targeting hundreds of suspects across the financial industry.
Feeling robbed
In Denmark, the case against Shah has drawn the ire of the public. The country, which is in the middle of an economic recession caused by the coronavirus, claims that it has been robbed.
“In a country like Denmark, and mainly at the time of Covid-19, it is of substantial importance,” said Alexandra Andhov, a law professor at the University of Copenhagen. The nation’s tax authorities have dealt with alleged fraud cases before, but “not in the amount of $ 2 billion,” she said.
Shah seemed calm and upbeat as he explained how he would be arrested if he tried to fly home to London. Married with three children and based in Dubai since 2009, Shah has spent the past five years absorbed in legal documents and talking to his lawyers, he said. For authorities trying to get you out of exile, he has a piece of advice: know your tax code.
“It’s so nice to put someone’s face on the cover of a newspaper and say ‘Look at this guy who lives in Dubai, sitting on the beach every day drinking a piña colada while you’re broke and you don’t have a job,'” he said. “I’d say look at your legal system.”
First steps
Shah isn’t the only person caught up in the European Cum-Ex scandal. German prosecutors have been more aggressive than their Danish counterparts and have already indicted more than 20 people. In a landmark trial earlier this year, two former UniCredit SpA merchants 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 regretted his actions.
“Knowing what I know now, I would not have gotten involved in the Cum-Ex industry,” said Shields, who avoided jail time because he cooperated with the investigation.
A decade ago, Cum-Ex offerings were very popular throughout the financial industry. Shah says he got 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 while working at Credit Suisse Group AG in the early 2000s, a strategy known as dividend arbitrage. Will Bowen, a spokesman for the Swiss bank in London, said that “the above lawsuits concern a period after Sanjay Shah worked at Credit Suisse.”
Shah didn’t fully embrace Cum-Ex until he was hired by the Amsterdam-based Rabobank Group, several years later, when the financial crisis was beginning to affect the industry. Rishi Sethi, a spokesman for Rabobank, declined to comment on former employees.
Great ambitions
After being fired, Shah says he received offers from various brokerage firms that included profit sharing. But that was not enough for him, so he created his own company.
“I don’t want to do a part,” he said. “I want to do everything.”
That 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 rise to many multiples of that. In his recollections, JPMorgan Chase & Co also played a critical role in helping him get started because they were the company’s first custodian bank. Patrick Burton, a spokesman for the New York-based bank, declined to comment.
The plan that Shah supposedly orchestrated was audacious. 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 alongside companies in Malaysia and Luxembourg, that had received dividends from Danish shares and were entitled to taxes devolution. Satisfied with the proof they received, the Danes say they gave up about $ 2 billion.
Luxury houses
But most of the money, authorities say, flowed directly into Shah’s pockets. The agents and the hundreds of foreign entities had simply been part of an elaborate network that it had created alongside a series of fast-paced “fake transactions” set up to generate illicit refund requests, according to the country’s claim in UK courts.
As of January 2014, more than $ 700 million reportedly landed on Shah’s accounts. He channeled his wealth into property in London, Hong Kong, Dubai and Tokyo, Shah said, amassing a portfolio that he put in around 70 million pounds. He bought a 36-foot yacht for $ 500,000 in 2014 and named it Solo before upgrading to a $ 2 million, 62-foot model, the Solo II.
Shah’s lawyers said in their latest filing in the London lawsuit last month that Solo, which entered administration in 2016, provided “clearing services for clients to engage in legal and legitimate business strategies that were carried out in all times in accordance with Danish law. ” . ”
They said that dividend arbitrage trading is a widely known and “totally legitimate” trading strategy. Shah’s lawyers also question whether Denmark has jurisdiction to present her claim in the 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 a tip off to UK tax authorities from the company’s compliance officer.
A little boring
Her attorney at the time, Geoffrey Cox, told her in 2015 that she had nothing to fear and that it would all be over soon, Shah said. Cox, who would become UK Attorney General and play a pivotal role during several Brexit crises last year, declined to comment.
But instead, Shah’s legal troubles are just beginning. A gigantic three-part civil trial covering Skat’s allegations against Shah will begin in London next year. The allegations are also at the center of a massive civil case in the United States targeting other participants in the alleged scam.
Criminal investigations in Germany and Denmark are still continuing. While Shah said he has not been contacted by the UK Financial Conduct Authority, the watchdog said in February that it is investigating “substantial and suspected abusive trading of stocks on the London markets” linked to Cum schemes. -Former. A Dubai court dismissed Denmark’s lawsuit against Shah in August, although it is appealing the decision.
Back in Dubai, Shah said the ongoing saga is starting to wear him down.
“It’s been quite nice spending time with the kids and family, but now where I am, I’m getting bored and fed up,” Shah said. “Five years have passed. I don’t know how long it will take for things to wrap up. ”
.
