A Dubai-based hedge fund manager set up a fund in Ireland to claim tens of millions of euro in tax refunds from European authorities in trades now under investigation for suspected tax evasion.
The trades were part of a scheme known as cum-ex, which allowed a network of traders, hedge funds, asset managers and banks to claim multiple refunds on dividend withholding tax that was only paid once, or not at all, through a series of complex financial transactions.
It worked by buying and selling huge volumes of shares at key times about the date companies paid out dividends, to create confusion as to who was owed a tax refund.
Sanjay Shah is one of the more colourful figures in the cum-ex world. Born in Britain, the 51-year-old now lives in Dubai. After dropping out of medical school he entered the world of finance, but was made redundant during the 2008 financial crisis. He then set up his own company, Solo Capital, which was heavily involved in cum-ex trades.
An investigation by The Irish Times, in partnership with German newsroom Correctiv and 15 other media organisations, examined a huge leak of documents related to the scheme, the Cum-ex Files.
In an interview with German outlet ARD's Panorama, Mr Shah confirmed he set up a fund in Ireland to carry out cum-ex trades. Broadgate Ireland Funds was incorporated in March 2010, and wound up two years later, company records show.
‘Unjustified tax benefits’
German prosecutors allege Broadgate Ireland Funds claimed “unjustified tax benefits” in dividend withholding tax refunds worth €46.5 million from German tax authorities in 2010, according to prosecutors’ case files.
Mr Shah said the Central Bank in Ireland had been "unhappy" and raised some issues related to the Irish fund at the time.
"We had a meeting with them. It was quite difficult, but we answered all their questions," he said. The Central Bank refused to comment when asked what issues it had raised about the fund.
Mr Shah says he learned of an “inner circle” of people who understood cum-ex about 2008. Knowing how it worked was like having the “recipe for Coca-Cola”, he said.
“I was very, very convinced that these trades were totally legal and legit . . . At no point did anybody say this is illegal,” he said.
Solo Capital had "a couple of meetings" with Bank of Ireland (BOI), who Mr Shah said told the firm "they can't facilitate any business because they already have a client". A subsidiary of the bank, Bank of Ireland Securities Services (BOISS), was the custodian bank of EQI Irish Funds, which was involved in cum-ex trades in 2011.
A spokesman for BOI said it adhered “to the legislative and regulatory requirements in all countries in which it operates”.
“We have not been notified that BOISS is subject to an investigation. Where contacted by relevant authorities we will always endeavour to provide assistance to any criminal investigation,” he said.
EQI's founder, Salim Mohamed, did not respond to requests for comment.
Speaking about whether he thought cum-ex or similar schemes are still going on, Mr Shah said: "I would imagine [in] western Europe for a start."
High profile
While many of the figures in the cum-ex market kept low profiles, Mr Shah was flashy and owned a 60ft yacht called Solo.
In an interview with German investigators, one cum-ex figure described Mr Shah as a “cowboy”. There was concern his profile was going to “kill the market”, another said.
Mr Shah has protested his innocence and fought a number of legal actions taken against him. Danish authorities are seeking to put him on trial over an aggressive form of cum-ex he operated between 2012 and 2015.
Solo Capital claimed more than €1 billion worth of Danish kroner from tax authorities in Denmark, Mr Shah confirmed. He stated that he made "in excess of half a billion euros", but maintains he legally took advantage of a tax loophole.
Mr Shah said he would be willing to stand trial in Denmark, but did not wish to spend a long period in pre-trial detention.
His plan is to clear his name, and get back to work: “If I had the ability to run a business, I would immediately get involved in this business again. And that’s my plan . . . I’ve got the recipe.”
