The High Court in London has dismissed a £1.4bn fraud claim brought by Denmark’s tax authority, Skatterforvaltningen (Skat), in what is considered one of the highest-value civil cases in UK legal history. The case centered on allegations that hedge fund Solo Capital Partners, led by trader Sanjay Shah, orchestrated fraudulent tax rebate claims through complex “cum-ex” trading schemes.
Mr Justice Andrew Baker, delivering the ruling, said Skat had failed to prove it was deceived into paying the rebates. He noted that the tax authority’s internal systems for approving dividend refund claims were “so flimsy as to be almost non-existent.”
What Are Cum-Ex Schemes?
Cum-ex schemes exploit loopholes in dividend tax rules. By rapidly trading shares around dividend payout dates, investors created uncertainty about share ownership at the time dividends were issued. This confusion allowed multiple parties to claim tax rebates on a withholding tax that was, in reality, paid only once.
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The schemes have been described as some of Europe’s most damaging financial scandals, costing governments billions in lost revenue. Between 2012 and 2015, over 4,000 refund claims were filed in Denmark alone—none of which, according to the court, were valid under Danish law.
Sanjay Shah and Solo Capital’s Role
Solo Capital Partners, founded in London in 2009 by Sanjay Shah, was at the heart of Denmark’s cum-ex trades. Shah, extradited from Dubai in 2023, was convicted in Denmark last year and received the harshest penalty ever issued in the country for fraud.
Justice Baker described Shah as “not a trustworthy individual,” stating his testimony contained “implausible claims and obvious lies.” Despite this, the court found his conduct insufficient to establish Skat’s legal claim against the defendants in London.
Whistleblower’s Relief After Exoneration
The case originally named more than 100 defendants, including Solo Capital managers, corporate entities, and traders. Among them was Jas Bains, a lawyer who worked at Solo between 2010 and 2013. Bains later alerted Danish authorities to the scale of cum-ex trades and cooperated with investigators as a whistleblower.
Despite his cooperation, Bains was included in Skat’s wide-ranging damages claim. After the verdict, he told the BBC:
“This unnecessary trial cost me eight years of my life and I’m grateful to the justice system for exonerating me.”
Denmark Plans Appeal Amid Soaring Legal Costs
The Danish government has strongly disagreed with the judgment and confirmed it is seeking to appeal. Legal analysts estimate that the 18-month trial, which capped an eight-year legal battle, could result in hundreds of millions of pounds in legal costs.
While Denmark continues to pursue justice abroad, the ruling underscores the difficulty governments face in reclaiming losses from complex financial schemes that exploited weaknesses in cross-border tax systems.
