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The Unemployed Trader Who Became a $700 Million Exile

(Bloomberg) — When Sanjay Shah lost his job during the financial crisis more than a decade ago, he was one of thousands of mid-level traders suddenly out of work.Shah didn’t take long to get back into the game, setting up his own fund targeting gaps in dividend-tax laws. Within a few years, he charted a spectacular rise from trading-floor obscurity to amassing as much 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 founded.Fueling his ascent were what he maintains were legal, if ultimately controversial, Cum-Ex trades. Transactions like these exploited legal loopholes across Europe, allowing traders to repeatedly reap dividend tax refunds on a single holding of stock. The deals proved hugely lucrative for those involved — except, of course, for the governments that paid up billions. German lawmakers have called it the greatest tax heist in history.Denmark, which is trying to recoup some 12.7 billion krone ($2 billion), or close to 1% of its gross domestic product, says the entire enterprise was a charade. Its lawyers are seeking to gain access to bank records that they maintain will prove that point. Authorities have now frozen much of Shah’s fortune and he’s fighting lawsuits and criminal probes in several countries. His lawyers have told him he’ll be arrested if he leaves the Gulf city for Europe, though he’s yet to be charged.But in a series of recent interviews from his $4.5 million home in Dubai, Shah was unrepentant.“Bankers don’t have morals,” the 50-year-old said on a video call. “Hedge-fund managers, and so on, they don’t have morals. I made the money legally.”‘Allowed It’Shah and the firm he set up — Solo Capital Partners LLP — are central figures in the Danish Cum-Ex scandal, in which he said his company helped investors to rapidly sell shares and claim multiple refunds on dividend taxes.Read more: How the ‘Cum-Ex’ Tax Dodge Works: QuickTakeAuthorities have been probing hundreds of bankers, traders and lawyers in several countries as they try to account for the billions of euros in taxpayer funds that they say were reaped. But Shah says he’s being made a “scapegoat” for figuring out how to legally profit from obscure tax-code loopholes that allowed Cum-Ex trades, named for the Latin term for “With-Without.”“Prove that any law was broken,” Shah said. “Prove that there was fraud. The legal system allowed it.”The Danish tax agency, Skat, says it’s frozen as much as 3.5 billion Danish kroner of Shah’s assets, including a $20-million London mansion, as part of a sprawling lawsuit against the former banker and his alleged associates.The agency 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 said in a statement. “It looks like paper transactions with no connection to any real holding of shares.”Shah still reaps about 200,000 pounds ($250,000) a year from renting out his properties, he said, less than half of what he got before the arrival of Covid-19.The former trader faces additional heat in Germany, where prosecutors are probing him as part of a nationwide dragnet that’s targeted hundreds of suspects throughout the finance industry.Feeling RobbedIn Denmark, the case against Shah has triggered public anger. The country, which is in the middle of an economic 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,” 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 appeared at ease and upbeat while outlining how he’d 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 engrossed in legal papers and talking to his lawyers, he said. To the authorities trying to extract him from his exile, he has a piece of advice: know your tax code.“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 said. “I would say look at your legal system.”First StridesShah is hardly the only person ensnared in the European Cum-Ex scandal. German prosecutors have been more aggressive than their Danish…