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

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.

• Dubai court orders Sanjay Shah to repay $1.7 billion in tax fraud case