Denmark Charges 6 More People in $2.1 Billion Cum-Ex Scandal

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Apr 13 2021, 1:40 PMApr 13 2021, 2:27 PMApril 13 2021, 1:40 PMApril 13 2021, 2:27 PM

(Bloomberg) -- Denmark charged six more people with fraud as prosecutors move closer to completing a years-long hunt to track down a total of $2.1 billion allegedly stolen through a dividend-tax scam.

Formal charges were brought against three U.S. and three U.K. citizens for defrauding Danish tax authorities out of more than 1.1 billion kroner ($175 million), according to a statement on Tuesday. The six used German lender North Channel Bank for their transactions, the Danish prosecutor said.

Denmark is intensifying its work on the case after earlier this year charging the alleged mastermind behind the fraud, hedge fund founder Sanjay Shah. Police say they’re aware that none of the people charged is likely to willingly turn up for trial in Denmark. Authorities are therefore working on “all conceivable options” to bring them to justice, Acting State Prosecutor Per Fiig said.

Danish authorities allege that a wide network of bankers, lawyers and other financiers spanning the U.S. to Malaysia devised multiple schemes to defraud the country of its tax revenue. Prosecutors say the networks created offshore pension plans to claim refunds on dividend taxes, despite never having owned the underlying Danish shares.

Denmark is trying to have Shah, a U.K. citizen based in Dubai, extradited to face trial. A Danish court ruled last month that Shah should be subject to pre-trial detention, a decision that lays the groundwork for extradition. Shah has said he’s innocent and that he took advantage of legal loopholes in Danish law that allowed for so-called Cum-Ex trades.

Danish prosecutors say the charges announced on Tuesday target “the central principals behind the fraud which was committed by means of help from the German North Channel Bank.” They say that “hundreds of fictitious share trades” were made between 27 U.S.-based one-person pension plans, nine companies and intermediaries to make it appear as if the pension plans were entitled to tax refunds.

Prosecutors will probably seek a penalty of 12 years behind bars -- more than such crimes would usually entail -- because of the severity of the case, Fiig said.

Danish authorities are trying to recoup some 12.7 billion kroner in tax refunds. Shah was charged with defrauding the country out of more than 9 billion kroner by submitting fictitious claims for refunds on dividend taxes.

The practice of Cum-Ex, named for the Latin term for “With-Without,” took advantage of tax laws that seemed to allow multiple investors to claim refunds on a dividend that was paid only once.