Danish tax authority loses $1.9 billion London 'cum-ex' tax fraud case

LONDON (Reuters) - Denmark's tax authority lost a 1.44 billion pound ($1.95 billion) London lawsuit on Thursday against Sanjay Shah's hedge fund and others for defrauding the Nordic state, in a blow to its efforts to recoup vast tax losses from "cum-ex" schemes.

Skatteforvaltningen (SKAT) sued Shah and his now defunct Solo Capital investment fund at London's High Court in 2018, alleging that Shah and Solo Capital were responsible for the bulk of its claims of cum-ex-related dividend tax fraud.

After a trial that began last year, Judge Andrew Baker ruled that none of the 4,000-plus tax refund claims examined in court were valid under Danish tax law and that SKAT would have been entitled not to pay any of them.

However, Baker said SKAT had not been misled by Shah and others between 2012 and 2015. It had had controls "so flimsy as to be almost non-existent", he said in a summary of the judgment.

He added that "Sanjay Shah and others were able to and did help themselves to a fortune because SKAT’s processes were so limited".

'DEVASTATING BLOW' TO SKAT

Cum-ex schemes, which flourished following the 2008 credit crisis, involved trading shares rapidly around a syndicate of banks, investors and hedge funds before and after a stock's dividend payment to exploit loopholes in the tax systems of countries such as Denmark, Germany and Belgium to claim refunds.

SKAT, which has been pursuing Shah for years and forced his extradition from Dubai in 2023, said it would seek an appeal.

"The Tax Authority strongly disagrees with the premises of the judgment and is now seeking to appeal it," the agency said in a statement.

The ruling comes 10 months after a Danish court sentenced Shah to 12 years in prison for dividend tax fraud after a parallel criminal case brought by SKAT. He is appealing.

Chris Waters, a lawyer at Meaby & Co who represents Shah, welcomed the judgment as an "overwhelming victory".

Syed Rahman, a lawyer at Rahman Ravelli who is not involved in the case, said the ruling was a "devastating blow" to SKAT.

The London judgment comes after a U.S. jury in February awarded $500 million to SKAT after the first U.S. civil trial over cum-ex trades.