Sanjay Shah is charged with stealing $1.6b from Danish tax authorities

One of the main perpetrators for the Cum/Ex fraud, the biggest white collar crime in history, has been charged by the Danish tax authorities. He had defrauded Danish tax authorities by an estimated $1.6 bn and is currently living in self-exile in Dubai.

The Cum/Ex scandal, discovered and investigated by a consortium of journalists in 2018, is well explained in the second article below (at this link).

Here are the main points of the ‘tax-trading’, or ‘dividend arbitrage’ activities:

  • Corporations are generating revenues and are taxed on their profits. They pass on most of the net profits to their shareholders via dividends. These shareholders are also taxed on their income by the tax authority. As a result, the same economic activity is taxed twice, a first time at the company level and the second time at the investor level.
  • To avoid this double taxation of the same economic activity, most tax authorities give a ‘tax credit’ to the shareholders, which is attached to the ‘net’ dividend paid by the company, to make a ‘gross’ dividend – the number usually announced by the company.
  • But not everybody is entitled to this tax credit. The shareholder needs to be in the same tax jurisdiction as the company to receive it. For instance, if you are a US investor and holds a US stock, the IRS grants you that right and you will receive 100% of the gross dividend. If on the other hand, you are foreign shareholder, say a Swiss company, then the IRS will not give you this tax credit for this same US stock, and its dividend is only worth 85 cents on the dollar to you.
  • Countries may have tax treaties where they recognize the tax collected by the other country and do give the tax benefit across jurisdictions. This is not the general case.
  • Now, if you are the foreign shareholder of many US stocks, the missing 15% across all your dividends represent a sizeable amount. It becomes tempting to sell the stock to a US company ‘just over the dividend’ so that you two can collect the tax credit and somehow share it. You just have to buy back the shares after the dividend. Unfortunately, if the stock moves upward during the period, you miss the stock outperformance, and that movement is generally larger than the value of the tax credit, cancelling the benefit of the trade.
  • It happens that derivatives allow you to cover for this missing exposure. They allow you to transfer the share to a US entity without losing the economic benefit of owning the share. The US company simply buys the share, and sells a derivatives to the foreign company for a few days in exchange. Once the derivatives expires, the US company sells the share back to its foreign investor. The US and the foreign companies then share the extra 15% of dividend tax credit. Everybody is happy, except the tax authority, who has lost 15% of the dividend.
  • This ‘tax trading’ is strictly prohibited in most jurisdiction. Therefore, it happens by the bucket. There is an enormous business of collecting and sharing tax credit, notably in Europe (where there are so many different tax jurisdictions and tax treaties) that the business can be extremely lucrative to professionals with the right knowledge. Many tricks are involved to hide the operations from auditors or tax authorities.

The Cum/Ex trade is slightly different, and it doesn’t require a derivatives trade:

  • One day, a trader sold a stock right before the dividend, and its settlement occurred between the cum date (the last day the stock entitles the owner to a dividend) and the record date (the date by which you need to physically have the stock in your account to be transferred the dividend by the company). For some reason, both the buyer and the seller of the stock realized that they were entitled to the tax credit.
  • The trader started to trade stocks with a friend, then with himself at the right time, so as to collect more of that tax precious credit.
  • Eventually, him and other traders expanded the activity to other countries, and took advantage of tax treaties to ‘hide’ the operation to tax authorities, as well as increase the diversity and number of opportunities.
  • Traders built hedge funds just for that business, and approached investors to help them with the cash and to share the legal/compliance/tax risk.
  • To protect themselves, the actors hired tax specialists, who justified the legality and tax conformance of such operations. Politicians got involved to change the laws, but they were surprisingly inefficient in that matter…
  • That’s where journalists came in. They discovered the pot of gold, presented themselves as such potential investors and investigated both the actors and the tax business, before publishing their findings through the website indicated below.
  • The tax fraud had already been running for many years and by so many managers that the overall activities are estimated to be worth 55 BILLION Euros. If confirmed, this no doubt constitutes the biggest heist in history.
  • Governments fell when the activity – and its amplitude – were revealed.

There are now enormous legal procedures around the globe to recollect these tax credits and pursue the actors. The issue is not simple, as many tax specialists have confirmed the legality of the trades, and many of the operations were organized across multiple tax jurisdictions. Needless to say, the actors aren’t exactly willing to come forward to explain their operations.

As for Sanjay Shah, he is self-exiled in Dubai, in a golden prison with no extradition treaty, pending the outcome of his litigation with the Danish government.


For transparency, the author of this article is one of the very few expert witnesses with direct knowledge of tax trading and is retained in such cases.


With credits to Frances Schwartzkopff, Morten Buttler and Ellen Milligan at Bloomberg, in an article reproduced by ThePrint below.


The Cum/Ex explanation from the investigative journalists:

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Written by Gontran de Quillacq

Gontran de Quillacq is an expert witness and a legal consultant. He is a recognized authority in options, trading, derivatives, structured products, portfolio management, hedge funds, mathematical finance, quantitative investment, strategy research and financial markets in general.



  1. ICAP, the spider in the Cum/Ex web | Navesink International - […] January 7, 2021: Sanjay Shah is charged with stealing $1.6b from Danish tax authorities […]

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