Sanjay Shah Gets 12 Years for $1.3B Danish Tax Fraud

GLOSTRUP, Denmark (Reuters) - British hedge fund trader Sanjay Shah was sentenced by a Danish court to 12 years in prison after being found guilty on Thursday of defrauding the state to the tune of $1.3 billion in a 'cum-ex' tax case.

The sentence, one of the longest for tax fraud in Danish history, comes after a high-profile trial over trading schemes that drained billions of dollars from the public treasuries of several European countries following the 2008 financial crisis.

The city court found that Shah, 54, masterminded a scheme that fraudulently secured 9 billion Danish crowns ($1.27 billion) in dividend tax refunds from the Danish treasury between 2012 and 2015.

Shah, who appeared in court wearing a red Christmas hat, has denied any wrongdoing and argued that he used a legal loophole. He immediately appealed the verdict to the Danish High Court.

Prosecutors had sought the maximum sentence of 12 years in prison.

In an interview with Danish broadcaster TV2 before the verdict, Shah called himself "a greedy bastard" and said his trading scheme had been "like playing Space Invaders," where he wanted to beat his previous high score.

"This is a tough sentence," said Florian Hollenbach, associate professor at Copenhagen Business School. "The verdict signals to tax authorities and prosecutors around the world that strong convictions are indeed possible and tax evasion cases should be pursued."

Shah also faces a separate 1.44 billion pound ($1.83 billion) civil tax fraud case in London, filed by the Danish tax authority, that is due to conclude in April.

He has told London's High Court by video-link from Denmark that a legal "defect" had allowed a trading strategy that became so successful that he bought a Ferrari and paid himself a 19 million pound bonus when he turned 40.

Shah was apprehended in Dubai in 2022 and extradited to Denmark the following year for prosecution.

Directed by Shah's London-based hedge fund Solo Capital Partners, investors rapidly traded shares around dividend payout day, creating an illusion of numerous owners, each seemingly eligible for tax refunds on dividends, according to prosecutors.

Danish justice minister Peter Hummelgaard told Reuters in an email that he was satisfied with outcome.

Shah had said in court that the trades had allowed participants to claim ownership of shares, thus being entitled to tax refunds even if they did not own the shares and never paid any dividend tax in Denmark.

(Reporting by Isabelle Yr Carlsson, Jacob Gronholt-Pedersen and Louise Rasmussen, additional reporting by Kirstin Ridley in London, editing by Terje Solsvik, Alexandra Hudson)