British trader found guilty of £1bn fraud

A British hedge fund trader, Sanjay Shah, has been sentenced to 12 years in prison in Denmark for his role in orchestrating a tax fraud scheme that defrauded the Danish government of over £1 billion. This sentence marks the heaviest penalty ever handed down in Denmark for a fraud case.

Along with his prison term, Shah, who founded the London-based hedge fund Solo Capital Partners, received a permanent ban from entering Denmark. His assets, including properties valued at $1 billion (DKK 7.2 billion), will also be seized by authorities. Shah immediately appealed the decision and remains in custody. His lawyer, Kaare Pihlmann, expressed hope that the High Court might reverse the decision and issue a more lenient sentence.

Shah appeared in court wearing a navy hoodie and a red Santa Claus hat. He remained calm as the judge read the verdict. The prosecutor, Nanna Blach, described Shah as playing a “completely central and controlling role” in the fraudulent scheme, which she said was “meticulously planned and organised.” The case had drawn significant attention due to its scale and complexity.

The trial lasted several months, and prosecutors accused Shah of masterminding a “cum-ex” scheme, which involved using a series of complex trades to fraudulently claim over £1 billion (DKK 9 billion) in dividend tax refunds from the Danish government between 2012 and 2015. Shah consistently denied any wrongdoing, arguing that he was exploiting a legal loophole, and his defense attorneys attempted to have the case dismissed multiple times.

Danish prosecutor Marie Tullin explained that the severity of the sentence was due to the “extraordinarily big amount” of money involved, the length of the scheme, and Shah’s central role in managing the fraud over several years. She called it the largest fraud case in Denmark’s history, adding that it was a crime of unprecedented magnitude in the country.

Before his arrest, Shah lived in Dubai, where he was known for hosting extravagant parties and charity events, including concerts featuring famous celebrities to benefit his autism charity. In December 2022, Shah was arrested in Dubai and extradited to Denmark.

Cum-ex schemes, a type of tax fraud involving the rapid sale of large volumes of shares around dividend payments to create duplicate claims for tax refunds, became widespread after the 2008 financial crisis. Denmark, along with Germany and Belgium, was severely impacted by these schemes. The Danish government has estimated that cum-ex trading has cost the country more than $1.8 billion (DKK 12.7 billion) in losses. Shah was one of nine individuals, including both British and US nationals, accused of participating in defrauding the Danish state.

In addition to his criminal trial in Denmark, Shah is also facing a civil tax fraud case in London, filed by the Danish tax authority. This case is scheduled to conclude in April.

As Shah left the court, escorted by police officers, he smiled at reporters while wearing his Santa hat once more and remarked, “See you next year.”

The case highlights the growing issue of complex tax fraud schemes in Europe and serves as a warning of the severe penalties that can result from such actions. The significant size of the fraud and the attention it received are expected to have far-reaching consequences for both Shah and those involved in similar financial schemes.

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