The unemployed trader who became a $700m exile

When Sanjay Shah misplaced his job throughout the monetary disaster greater than a decade in the past, he was one in every of hundreds of mid-level merchants immediately out of labor.

Shah didn’t take lengthy to get again into the sport, establishing his personal fund concentrating on gaps in dividend-tax legal guidelines. Within a few years, he charted a spectacular rise from trading-floor obscurity to amassing as a lot as $700 million and a property portfolio that stretched from Regent’s Park in his native London to Dubai. He commanded a 62-foot yacht and booked Drake, Elton John and Jennifer Lopez to play for an autism charity he’d based.


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Fuelling his ascent had been what he maintains had been authorized, if finally controversial, Cum-Ex trades. Transactions like these exploited authorized loopholes throughout Europe, permitting merchants to repeatedly reap dividend tax refunds on a single holding of stock. The offers proved massively profitable for these concerned — besides, after all, for the governments that paid up billions. German lawmakers have known as it the best tax heist in historical past.

Denmark, which is making an attempt to recoup some 12.7 billion krone ($2 billion), or near 1% of its gross home product, says your entire enterprise was a charade. Its legal professionals are searching for to realize entry to financial institution data that they keep will show that time. Authorities have now frozen a lot of Shah’s fortune and he’s preventing lawsuits and prison probes in a number of nations. His legal professionals have instructed him he’ll be arrested if he leaves the Gulf metropolis for Europe, although he’s but to be charged.

But in a collection of latest interviews from his $4.5 million residence in Dubai, Shah was unrepentant.

“Bankers don’t have morals,” the 50-year-old stated on a video name. “Hedge-fund managers, and so on, they don’t have morals. I made the money legally.”

‘Allowed it’

Shah and the agency he arrange — Solo Capital Partners LLP — are central figures within the Danish Cum-Ex scandal, wherein he stated his firm helped buyers to quickly promote shares and declare a number of refunds on dividend taxes.

Authorities have been probing a whole bunch of bankers, merchants and legal professionals in a number of nations as they attempt to account for the billions of euros in taxpayer funds that they are saying had been reaped. But Shah says he’s being made a “scapegoat” for determining the way to legally revenue from obscure tax-code loopholes that allowed Cum-Ex trades, named for the Latin time period for “With-Without.”

“Prove that any law was broken,” Shah stated. “Prove that there was fraud. The legal system allowed it.”

The Danish tax company, Skat, says it’s frozen as a lot as 3.5 billion Danish kroner of Shah’s belongings, together with a $20-million London mansion, as a part of a sprawling lawsuit towards the previous banker and his alleged associates.

The company hasn’t seen “evidence that supports that real shares were involved in the trades relating to the dividend refunds reclaimed in the Shah universe,” it stated in a assertion. “It looks like paper transactions with no connection to any real holding of shares.”

Shah nonetheless reaps about 200 000 kilos ($250 000) a 12 months from renting out his properties, he stated, lower than half of what he bought earlier than the arrival of Covid-19.

The former trader faces further warmth in Germany, the place prosecutors are probing him as a part of a nationwide dragnet that’s focused a whole bunch of suspects all through the finance business.

Feeling robbed

In Denmark, the case towards Shah has triggered public anger. The nation, which is in the midst of an financial recession wrought by the coronavirus, claims it has been robbed.

“In a country like Denmark, and mainly in the times of Covid-19, it is of substantial importance,” stated Alexandra Andhov, a legislation professor on the University of Copenhagen. The nation’s tax authorities have handled alleged fraud instances earlier than however “not in the amount of $2 billion,” she stated.

Shah appeared relaxed and upbeat whereas outlining how he’d be arrested if he tried to fly residence to London. Married with three kids and based mostly in Dubai since 2009, Shah has spent the previous 5 years engrossed in authorized papers and speaking to his legal professionals, he stated. To the authorities making an attempt to extract him from his exile, he has a piece of recommendation: know your tax code.

Sanjay Shah walks in entrance of the Atlantis Hotel on the Palm Jumeriah in Dubai, United Arab Emirates, on September 29. Image: Bloomberg

“It’s very nice to put somebody’s face on a front page of a newspaper and say ‘Look at this guy living in Dubai, sitting on the beach every day sipping a Pina Colada while you’re broke and you don’t have a job’,” he stated. “I would say look at your legal system.”

First Strides

Shah is hardly the one individual ensnared within the European Cum-Ex scandal. German prosecutors have been extra aggressive than their Danish counterparts and have already charged greater than 20 folks. At a landmark trial earlier this 12 months, two ex-UniCredit SpA merchants had been convicted of aggravated tax evasion.

One of them, Martin Shields, instructed the Bonn courtroom that whereas he had made tens of millions from Cum-Ex, he now regretted his actions.

“Knowing what I now know, I would not have involved myself in the Cum-Ex industry,” stated Shields, who prevented jail time as a result of he cooperated with the investigation.

A decade in the past, Cum-Ex offers had been wildly in style all through the monetary business. Shah says he picked up the thought throughout his years as a trader in London for a few of the world’s greatest banks.

The son of a surgeon, Shah dropped out of medical college within the Nineteen Nineties and moved into finance. He first noticed merchants exploiting dividend taxes whereas at Credit Suisse Group AG within the early 2000s, a technique generally known as dividend arbitrage. Will Bowen, a spokesman for the Swiss financial institution in London, stated “the lawsuits referred to relate to a period after Sanjay Shah worked at Credit Suisse.”

Shah didn’t absolutely embrace Cum-Ex till he was employed by Amsterdam-based Rabobank Group a number of years later because the monetary disaster was starting to tear by way of the business. Rishi Sethi, a spokesman for Rabobank, declined to touch upon former staff.

Big ambitions

After being laid off, Shah says he acquired provides from a number of brokerage corporations that included profit-sharing. But that wasn’t sufficient for him, so he arrange his personal agency.

“I don’t want to make a share,” he stated. “I want to make the whole lot.”

That ambition was memorialised within the title that Shah picked for his firm: Solo Capital Partners.

Shah stated he had about half a million kilos when he began Solo. Within half a decade, his internet price would soar to many multiples of that. According to his recollection, JPMorgan Chase & Co. additionally performed a pivotal position in serving to him get began as a result of they had been the agency’s first custodian financial institution. Patrick Burton, a spokesman for the New York-based financial institution, declined to remark.

The scheme that Shah allegedly orchestrated was audacious. A small group of brokers within the UK wrote to Skat between 2012 and 2015, claiming to symbolize a whole bunch of abroad entities — together with small US pension funds together with corporations in Malaysia and Luxembourg — that had acquired dividends from Danish shares and had been entitled to tax refunds. Satisfied with the proof they acquired, the Danes say they handed over some $2 billion.

Luxury houses

But a lot of the money, authorities say, flowed as a substitute instantly into Shah’s pockets. The brokers and the a whole bunch of abroad entities had merely been a part of an elaborate net he’d created together with a collection of dizzying “sham transactions” set as much as generate illicit refund requests, based on the nation’s declare in UK courts.

Starting in January 2014, greater than $700 million allegedly landed in Shah’s accounts. He funneled his wealth into property throughout London, Hong Kong, Dubai and Tokyo, Shah stated, amassing a portfolio that he put at about 70 million kilos. He purchased a 36-foot yacht for $500,000 in 2014 and known as it Solo earlier than upgrading to a $2 million, 62-ft mannequin, the Solo II.

Shah’s legal professionals stated in his newest submitting within the London lawsuit final month that Solo — which went into administration in 2016 — offered “clearing services for clients to engage in lawful and legitimate trading strategies that were conducted at all times in accordance with Danish law.”

They stated that dividend arbitrage buying and selling is a extensively identified and “wholly legitimate trading strategy.” Shah’s legal professionals are additionally contesting whether or not Denmark has jurisdiction to pursue its declare within the English courts.

It’s been 5 years since Shah discovered he was going through a prison probe, when the UK National Crime Agency raided Solo’s places of work following a tip to British tax authorities from the corporate’s compliance officer.

Slightly bored

His lawyer on the time, Geoffrey Cox, instructed him in 2015 that he had nothing to worry and that it might all be over quickly, Shah stated. Cox, who would go on to turn out to be UK Attorney General and play a pivotal position throughout varied Brexit crises final 12 months, declined to remark.

Geoffrey Cox

But as a substitute Shah’s authorized issues are simply starting. A mammoth three-part civil trial protecting Skat’s allegations towards Shah will begin in London subsequent 12 months. The accusations are additionally on the coronary heart of a huge US civil case concentrating on different contributors within the alleged rip-off.

Criminal probes in Germany and Denmark are nonetheless rumbling on. While Shah stated he hasn’t been contacted by the UK Financial Conduct Authority, the watchdog stated in February that it’s investigating “substantial and suspected abusive share trading in London’s markets” tied to Cum-Ex schemes. A Dubai courtroom threw out Denmark’s lawsuit towards Shah in August, although it’s interesting the choice.

Back in Dubai, Shah stated the continuing saga is beginning to put on him down.

”It’s been fairly good spending time with the children and household however now the place I’m, I’m simply becoming bored and fed up,” Shah stated. “It’s been five years. I don’t know how long it will take for matters to conclude.”

© 2020 Bloomberg


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