Sanjay Shah’s downfall from lavish living to extradition from UAE

Briton once in the spotlight with pop legends now faces trial in $1.8 billion tax fraud

by

Mazhar Farooqui

  • Follow us on
  • google-news
  • whatsapp
  • telegram

Top Stories

Photo: Reuters
Photo: Reuters

Published: Thu 7 Dec 2023, 2:52 PM

Last updated: Thu 7 Dec 2023, 9:57 PM

Once the poster boy for opulence in Dubai, Sanjay Shah's extravagant lifestyle painted a picture of luxury. His mansion, fleet of yachts, and headline-grabbing events featuring Prince, Elton John, Snoop Dogg, and Ed Sheeran — all in the name of his autism charity— were the stuff dreams were made of.

However, the spotlight has now shifted, and the glamour has faded. On Wednesday, the 53-year-old British tycoon found himself escorted by two Danish policemen to a nondescript grey van on the runway of Copenhagen's Kastrup Airport.

The reason? Extradition from the UAE to face trial over allegations of submitting fraudulent applications for a staggering £1.44 billion ($1.8 billion) in dividend tax refunds — a hit equivalent to almost half a percent of Denmark's GDP.

Shah was nabbed by Dubai Police last year at the behest of Danish authorities probing his hedge fund, Solo Capital. Brigadier Jamal Al Jallaf, Director of the General Department of Criminal Investigations, highlighted the crackdown, initiated upon receipt of an international arrest warrant from Danish authorities. A specialised task force, comprising elite officers from the Wanted Persons Department and the Anti-Money Laundering Department, monitored Shah's activities as part of the investigation leading up to his detention in a Dubai Police raid. Expert Major General Khalil Ibrahim Al Mansouri, Assistant Commander-in-Chief for Criminal Investigation Affairs, provided insights into the tracking process at the time of his arrest.

Shah’s alleged fraud scheme, known as ‘Cum-ex’ trading, involved submitting thousands of applications to the Danish Treasury on behalf of investors and companies from several countries around the world to receive dividend tax refunds, Dubai Police said earlier. The scam, which spanned three years from 2012, has been described as one of the largest fraud cases in Denmark’s history.

Danish prosecutors are now pushing for Shah to remain in custody until his trial begins in January 2024. Denmark's Justice Minister, Petter Hummelgaard, has labelled it "one of our biggest and most serious cases of financial fraud."

Shah denies any wrongdoing, maintaining that his actions were within legal bounds. Last month, Guenther Klar, a former employee of Shah’s company from 2010 to 2012, went on trial in Denmark—the country's first court case on Cum-Ex fraud. Extradited from Belgium, Klar is accused of defrauding the government of £37m (320m Danish crowns). He has also maintained his innocence.

'Cum-ex' explained

But what is the Cum-Ex scandal? "Cum-Ex’ is Latin - and it means ‘with without’. In essence, it’s a massive stock trading scam by bankers, brokers, hedge funds, international tax firms, investment companies, lawyers and insurance companies."

These entities collaborated to facilitate their clients in obtaining tax refunds for payments they never made, defrauding EU member states of billions of euros.

The scheme operated by engaging in rapid trading of shares, alternating between shares with (cum) and without (ex) dividend rights. This created a deceptive impression for tax authorities of multiple owners for a single set of shares. To amplify the volume of trades, a network of banks, brokers and lawyers, lent each other shares and established Special Purpose Vehicles (SPVs) for traders. Banks issued false confirmations to investors, indicating payment of dividend tax, while tax lawyers provided legal opinions to legitimize the process.

Denmark, Germany, and Belgium were particularly impacted by 'cum-ex' schemes, with Denmark being one of the hardest-hit countries. The scam involved swift share transactions among investors to sow confusion over share ownership during dividend payouts.

The financial scale of this EU-wide fraud is staggering, estimated to have cost EU taxpayers at least €55 billion. Germany, in particular, has been grappling with this scandal, despite implementing legal changes to prohibit such practices. The cum-ex scandal stands as Germany's most significant post-war fraud investigation, underscoring the widespread and enduring impact of this fraudulent scheme.

Shah, a veteran banker with stints at Morgan Stanley, Credit Suisse, and Rabobank spanning nearly two decades, found himself jobless in the aftermath of the 2008 financial crisis. Seizing the opportunity, he founded Solo Capital, a hedge fund firm based in London, boasting a team of financial experts across offices in London and Dubai. Married with three children, Shah relocated to Dubai in 2009, captivated by the city's allure.

His journey took a personal turn in 2011 when his youngest son was diagnosed with autism. After three years of collaborating with therapists and medical experts, Shah decided to champion autism awareness, founding Autism Rocks in 2014. The centre, however, met an untimely end in February 2020 amid a tax fraud probe targeting Shah.

The investigation intensified leading to the closure of Solo Capital in 2016. Simultaneously, British National Crime Agency raids.

ALSO READ:


More news from UAE