The more I read about it, the more I investigated,
the more I began to realize that,
oh my God, this is a huge story
and it raised so many obvious questions
about culture within these institutions
that I was just hooked
and I've been following it ever since.
Next to a landmark ruling
on what's been called the biggest tax heist ever,
Germany's top criminal court
has outlawed the controversial trading practice
known as Cum-Ex.
In short, it was the world's biggest banks,
brokerages, lawyers, accountants, hedge funds,
coming together over a decade
to make billions and billions of dollars
at the direct expense of taxpayers across Europe.
How much did you make from cum dividend trading?
How much did you make?
I think it was in the region of 700 million,
but it's hard to put a figure on it
because of currency exchanges and so on.
Sanjay Shah is basically a trader
who has become the poster boy for that scandal.
It's hard to think of too many other traders
in the history of the city
who have become so rich in such a short space of time.
So at the moment,
my financial situation is everything is frozen
and I'm allowed money to live on.
So the court in the UK
has approved for me to get paid every month living expenses
and also my legal fees and that's it.
So Sanjay grew up in London in the '70s and '80s.
London-born, London-raised, son of a doctor,
went to medical school himself, dropped out.
He first started off working at Merrill Lynch
and then Morgan Stanley in the back offices.
I think he found it quite mundane.
He very much was desperate
to get on the trading floor, in the action.
Every morning, I used to turn up to the office
and see a row of sports cars parked outside
and I said to my boss, "Who drives these cars?"
And he said, "The traders do on the fifth floor."
So I then decided that I wanted to be one of those people.
And he eventually landed on the trading floor
at Credit Suisse,
which was where he first learned
about dividend arbitrage trading.
He began to observe these quite complex trades
that exploited taxes on dividends in a really lucrative way.
Now, what he told us was
while you're doing various kinds of trades
trying to profit from dividend taxes up to that point,
the first time he started doing Cum-Ex trades
was at Rabobank on the eve of the financial crisis
around 2007, 2008.
I think to understand Cum-Ex,
you kind of have to go back to London
in the early 2000s,
which was when traders in the city began to figure out
how they could profit
from something that's called a withholding tax.
These traders would make
what is known as withholding tax applications.
So they would make claims for tax refunds
multiple times on dividend taxes that they only paid once.
Analogies for this that I've read
are like it's the equivalent of saying,
you know, me, you
and a few other people were entitled to tax refunds
because we all made a donation to charity
whereas in reality, it was just me who made that donation.
But through a series
of kind of very complicated rapid transactions,
we concealed or we made it very difficult to tell
exactly who it was
that made that donation on the date that it was made.
So they hand out the tax relief to a number of parties.
That's what Cum-Ex is
except that it doesn't take place with charitable donations,
it takes place with taxes on dividends.
This is gonna be one of the watershed days
in the financial market's histories.
The day began with a bailout,
the prime minister and the chancellor making it clear
that the financial system is so important to our society
that by saving our banks,
we're saving ourselves.
During the financial crisis, however,
Rabobank decided to stop doing Cum-Ex
and dividend tax kinds of transactions.
So Sanjay was out of a job once again.
And he decided in 2009
instead of finding more work at a bank,
that he would set up his own hedge fund.
I didn't want to be
someone who is trying to get a job in a bank
when no banks were hiring.
I think he very much wanted to reap more awards
from the trading floor than what a bank would allow.
So he set up his own fund
and called it Solo Capital Partners
to reflect that desire
to keep all the profits for himself.
He started his fund in 2009
with just half a million pounds,
which really wasn't much at all.
But this trading strategy was so profitable
that he amassed a fortune of several times that.
Within three or four years,
he had turned that into a personal fortune
of about $700 million.
And for about six years, he lived the high life.
He was making hundreds of millions of pounds
as were his employees
and he eventually went over to Dubai.
And he used that fortune to buy a 32 foot yacht.
He then traded that in for a 62 foot yacht.
He bought property in Hong Kong.
He bought property in London.
He bought property in New York, property in Dubai,
where he was now based.
He amassed this global property portfolio
and he amassed this huge personal fortune.
I was advised don't leave Dubai
because you will be arrested
and you'll be put in pretrial detention.
In 2016,
after Sanjay had made hundreds of millions of dollars,
Solo Capital Partners shut down.
Around this time,
investigations into Cum-Ex trades were swirling,
not just around Sanjay and Solo,
but around the industry in general.
The Cum-Ex tax fraud scheme,
this has been mentioned has cost EU countries,
a reported €55 billion, a huge sum of money,
to complex share deals with no economic purpose
other than to receive tax reimbursements from the state
and no actual tax being paid.
European citizens have, to put it bluntly, been robbed.
Cum-Ex, it was always an aggressive,
controversial trading strategy,
but what people in the industry say
is that Sanjay Shah and Solo Capital went even further.
He's accused by prosecutors
of creating this network of global entities,
including small U.S. pension funds,
and in one case a Jewish school in New York
to claim refunds on taxes on behalf of them as well.
So in terms of the Jewish school,
that one really was audacious.
The German prosecutors
say he claimed to represent this school,
which had tax exempt status
because of their religious status
in this agreement between Germany and the U.S.
So he claimed that they would buy German shares
and then his fund on behalf of them
would claim these refunds on those taxes
apparently without their knowledge.
What German prosecutors allege
is that Sanjay used this small Jewish school
and its tax exempt status
to pull off about $1.1 billion of trades.
This presumably delivers huge profits to Sanjay
and his hedge fund Solo Capital.
Sanjay is now facing a legal assault
on multiple fronts, okay?
He's got the Danish criminal charges
which have been pressed against him.
Then more recently, prosecutors in Hamburg, Germany
have also pressed criminal charges against Sanjay.
You feel that you you're being targeted individually?
Yeah, I feel I'm being targeted
and one of the reasons why
is that right from the beginning
the Danish authorities accused me of fraud.
Being accused of fraud
means assets can be frozen by prosecutors around the world.
It puts a label to me, which is unfair
and after five years, nothing has been proven.
There's two things.
There was the legality of this and the morality of this.
And for Denmark,
they say that Sanjay masterminded
a two billion dollar fraud against their country,
and that's nearly one percent of their GDP.
And so the morality of this
at a time when a country is reeling from financial crisis
and there's mass unemployment
and state funding is being squeezed across Europe,
to defraud a small economy like that
out of two billion dollars
is really quite something.
When we pushed him on the, I guess the morals of this,
he said himself that bankers and traders have no morals.
The only thing that matters
is whether you make money legally or not.
"All I was doing", he says,
"was exploiting that arbitrage
the same way that traders have done
down through the decades, nothing new."
Well, yeah, the barn doors were open.
They were told the barn doors were open.
People were driving trucks into the barn
taking out truckloads of cash for decades
and it's their bad.
There was an opportunity to be had.
I'm not the only one who took the opportunity.
There are many others.
So it's really important to remember
that even if Sanjay is the poster boy
of the Cum-Ex scandal,
he's a product of an industry,
he isn't the industry by himself.
This was not a rogue trading strategy
that Sanjay dreamed up in his flat in London.
This was a trading strategy
that as we've reported and as others have reported
was signed off at the highest levels
of some of the world's biggest financial institutions.
Cum-Ex investigations
have really taken off in the past year.
Germany now has around 1,000 suspects.
They've convicted three former bankers.
They've charged around a dozen others.
Three trials are currently underway
and it's really spread
to some of the biggest institutions in Europe.
I don't know where to start with Deutsche Bank.
As Alex said, they had a downgrade at the end of last week.
There are reports that Garth Richie and Mr. Jane,
the former CEO under investigation now for this tax problem.
So for example, at Deutsche Bank,
80 current and former employees are being investigated.
Deutsche Bank has specifically said
that it never directly participated
as a short seller or a buyer in Cum-Ex deals
and it is cooperating with authorities
and in Denmark where Sanjay Shah is under investigation,
things have moved more slowly.
He and others have now been charged.
But as far as we know,
nothing has been done to try and extradite them.
He remains in Dubai
where it's very hard to extradite individuals,
but this isn't the end of the story
when it comes to Cum-Ex investigations,
really we really are right at the beginning.
I got to tell you that when I'm,
I believe I'm gonna be clear of this soon,
maybe in a year or two.
When I am, I will be back in business
and I will be pursuing these types of trades.