The Unemployed Trader Who Became a $700 Million Exile, , on October 6, 2020 at 3:00 am

By ILP
On 10/06/2020
Tags:

(Bloomberg) — When Sanjay Shah lost his job during the financial crisis more than a decade ago, he was one of thousands of mid-level traders suddenly out of work.Shah didn’t take long to get back into the game, setting up his own fund targeting gaps in dividend-tax laws. Within a few years, he charted a spectacular rise from trading-floor obscurity to amassing as much as $700 million and a property portfolio that stretched from Regent’s Park in his native London to Dubai. He commanded a 62-foot yacht and booked Drake, Elton John and Jennifer Lopez to play for an autism charity he’d founded.Fueling his ascent were what he maintains were legal, if ultimately controversial, Cum-Ex trades. Transactions like these exploited legal loopholes across Europe, allowing traders to repeatedly reap dividend tax refunds on a single holding of stock. The deals proved hugely lucrative for those involved — except, of course, for the governments that paid up billions. German lawmakers have called it the greatest tax heist in history.Denmark, which is trying to recoup some 12.7 billion krone ($2 billion), or close to 1% of its gross domestic product, says the entire enterprise was a charade. Its lawyers are seeking to gain access to bank records that they maintain will prove that point. Authorities have now frozen much of Shah’s fortune and he’s fighting lawsuits and criminal probes in several countries. His lawyers have told him he’ll be arrested if he leaves the Gulf city for Europe, though he’s yet to be charged.But in a series of recent interviews from his $4.5 million home in Dubai, Shah was unrepentant.“Bankers don’t have morals,” the 50-year-old said on a video call. “Hedge-fund managers, and so on, they don’t have morals. I made the money legally.”‘Allowed It’Shah and the firm he set up — Solo Capital Partners LLP — are central figures in the Danish Cum-Ex scandal, in which he said his company helped investors to rapidly sell shares and claim multiple refunds on dividend taxes.Read more: How the ‘Cum-Ex’ Tax Dodge Works: QuickTakeAuthorities have been probing hundreds of bankers, traders and lawyers in several countries as they try to account for the billions of euros in taxpayer funds that they say were reaped. But Shah says he’s being made a “scapegoat” for figuring out how to legally profit from obscure tax-code loopholes that allowed Cum-Ex trades, named for the Latin term for “With-Without.”“Prove that any law was broken,” Shah said. “Prove that there was fraud. The legal system allowed it.”The Danish tax agency, Skat, says it’s frozen as much as 3.5 billion Danish kroner of Shah’s assets, including a $20-million London mansion, as part of a sprawling lawsuit against the former banker and his alleged associates.The agency hasn’t seen “evidence that supports that real shares were involved in the trades relating to the dividend refunds reclaimed in the Shah universe,” it said in a statement. “It looks like paper transactions with no connection to any real holding of shares.”Shah still reaps about 200,000 pounds ($250,000) a year from renting out his properties, he said, less than half of what he got before the arrival of Covid-19.The former trader faces additional heat in Germany, where prosecutors are probing him as part of a nationwide dragnet that’s targeted hundreds of suspects throughout the finance industry.Feeling RobbedIn Denmark, the case against Shah has triggered public anger. The country, which is in the middle of an economic recession wrought by the coronavirus, claims it has been robbed.“In a country like Denmark, and mainly in the times of Covid-19, it is of substantial importance,” said Alexandra Andhov, a law professor at the University of Copenhagen. The nation’s tax authorities have dealt with alleged fraud cases before but “not in the amount of $2 billion,” she said.Shah appeared at ease and upbeat while outlining how he’d be arrested if he tried to fly home to London. Married with three children and based in Dubai since 2009, Shah has spent the past five years engrossed in legal papers and talking to his lawyers, he said. To the authorities trying to extract him from his exile, he has a piece of advice: know your tax code.“It’s very nice to put somebody’s face on a front page of a newspaper and say ‘Look at this guy living in Dubai, sitting on the beach every day sipping a Pina Colada while you’re broke and you don’t have a job’,” he said. “I would say look at your legal system.”First StridesShah is hardly the only person ensnared in the European Cum-Ex scandal. German prosecutors have been more aggressive than their Danish counterparts and have already charged more than 20 people. At a landmark trial earlier this year, two ex-UniCredit SpA traders were convicted of aggravated tax evasion.One of them, Martin Shields, told the Bonn court that while he had made millions from Cum-Ex, he now regretted his actions.“Knowing what I now know, I would not have involved myself in the Cum-Ex industry,” said Shields, who avoided jail time because he cooperated with the investigation.A decade ago, Cum-Ex deals were wildly popular throughout the financial industry. Shah says he picked up the idea during his years as a trader in London for some of the world’s biggest banks.The son of a surgeon, Shah dropped out of medical school in the 1990s and moved into finance. He first observed traders exploiting dividend taxes while at Credit Suisse Group AG in the early 2000s, a strategy known as dividend arbitrage. Will Bowen, a spokesman for the Swiss bank in London, said “the lawsuits referred to relate to a period after Sanjay Shah worked at Credit Suisse.”Shah didn’t fully embrace Cum-Ex until he was hired by Amsterdam-based Rabobank Group several years later as the financial crisis was beginning to rip through the industry. Rishi Sethi, a spokesman for Rabobank, declined to comment on former employees.Big AmbitionsAfter being laid off, Shah says he received offers from several brokerage firms that included profit-sharing. But that wasn’t enough for him, so he set up his own firm.“I don’t want to make a share,” he said. “I want to make the whole lot.”That ambition was memorialized in the name that Shah picked for his company: Solo Capital Partners.Shah said he had about half a million pounds when he started Solo. Within half a decade, his net worth would soar to many multiples of that. According to his recollection, JPMorgan Chase & Co. also played a pivotal role in helping him get started because they were the firm’s first custodian bank. Patrick Burton, a spokesman for the New York-based bank, declined to comment.The scheme that Shah allegedly orchestrated was audacious. A small group of agents in the U.K. wrote to Skat between 2012 and 2015, claiming to represent hundreds of overseas entities — including small U.S. pension funds along with firms in Malaysia and Luxembourg — that had received dividends from Danish stocks and were entitled to tax refunds. Satisfied with the proof they received, the Danes say they handed over some $2 billion.Luxury HomesBut most of the money, authorities say, flowed instead directly into Shah’s pockets. The agents and the hundreds of overseas entities had merely been part of an elaborate web he’d created along with a series of dizzying “sham transactions” set up to generate illicit refund requests, according to the country’s claim in U.K. courts.Starting in January 2014, more than $700 million allegedly landed in Shah’s accounts. He funneled his wealth into property across London, Hong Kong, Dubai and Tokyo, Shah said, amassing a portfolio that he put at about 70 million pounds. He bought a 36-foot yacht for $500,000 in 2014 and called it Solo before upgrading to a $2 million, 62-ft model, the Solo II.Shah’s lawyers said in his latest filing in the London lawsuit last month that Solo — which went into administration in 2016 — provided “clearing services for clients to engage in lawful and legitimate trading strategies that were conducted at all times in accordance with Danish law.”They said that dividend arbitrage trading is a widely known and “wholly legitimate trading strategy.” Shah’s lawyers are also contesting whether Denmark has jurisdiction to pursue its claim in the English courts.It’s been five years since Shah learned he was facing a criminal probe, when the U.K. National Crime Agency raided Solo’s offices following a tip to British tax authorities from the company’s compliance officer.Slightly BoredHis lawyer at the time, Geoffrey Cox, told him in 2015 that he had nothing to fear and that it would all be over soon, Shah said. Cox, who would go on to become U.K. Attorney General and play a pivotal role during various Brexit crises last year, declined to comment.But instead Shah’s legal problems are just beginning. A mammoth three-part civil trial covering Skat’s allegations against Shah will start in London next year. The accusations are also at the heart of a massive U.S. civil case targeting other participants in the alleged scam.Criminal probes in Germany and Denmark are still rumbling on. While Shah said he hasn’t been contacted by the U.K. Financial Conduct Authority, the watchdog said in February that it’s investigating “substantial and suspected abusive share trading in London’s markets” tied to Cum-Ex schemes. A Dubai court threw out Denmark’s lawsuit against Shah in August, though it is appealing the decision.Back in Dubai, Shah said the ongoing saga is starting to wear him down.”It’s been quite nice spending time with the kids and family but now where I am, I’m just getting bored and fed up,” Shah said. “It’s been five years. I don’t know how long it will take for matters to conclude.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.,

The Unemployed Trader Who Became a $700 Million Exile(Bloomberg) — When Sanjay Shah lost his job during the financial crisis more than a decade ago, he was one of thousands of mid-level traders suddenly out of work.Shah didn’t take long to get back into the game, setting up his own fund targeting gaps in dividend-tax laws. Within a few years, he charted a spectacular rise from trading-floor obscurity to amassing as much as $700 million and a property portfolio that stretched from Regent’s Park in his native London to Dubai. He commanded a 62-foot yacht and booked Drake, Elton John and Jennifer Lopez to play for an autism charity he’d founded.Fueling his ascent were what he maintains were legal, if ultimately controversial, Cum-Ex trades. Transactions like these exploited legal loopholes across Europe, allowing traders to repeatedly reap dividend tax refunds on a single holding of stock. The deals proved hugely lucrative for those involved — except, of course, for the governments that paid up billions. German lawmakers have called it the greatest tax heist in history.Denmark, which is trying to recoup some 12.7 billion krone ($2 billion), or close to 1% of its gross domestic product, says the entire enterprise was a charade. Its lawyers are seeking to gain access to bank records that they maintain will prove that point. Authorities have now frozen much of Shah’s fortune and he’s fighting lawsuits and criminal probes in several countries. His lawyers have told him he’ll be arrested if he leaves the Gulf city for Europe, though he’s yet to be charged.But in a series of recent interviews from his $4.5 million home in Dubai, Shah was unrepentant.“Bankers don’t have morals,” the 50-year-old said on a video call. “Hedge-fund managers, and so on, they don’t have morals. I made the money legally.”‘Allowed It’Shah and the firm he set up — Solo Capital Partners LLP — are central figures in the Danish Cum-Ex scandal, in which he said his company helped investors to rapidly sell shares and claim multiple refunds on dividend taxes.Read more: How the ‘Cum-Ex’ Tax Dodge Works: QuickTakeAuthorities have been probing hundreds of bankers, traders and lawyers in several countries as they try to account for the billions of euros in taxpayer funds that they say were reaped. But Shah says he’s being made a “scapegoat” for figuring out how to legally profit from obscure tax-code loopholes that allowed Cum-Ex trades, named for the Latin term for “With-Without.”“Prove that any law was broken,” Shah said. “Prove that there was fraud. The legal system allowed it.”The Danish tax agency, Skat, says it’s frozen as much as 3.5 billion Danish kroner of Shah’s assets, including a $20-million London mansion, as part of a sprawling lawsuit against the former banker and his alleged associates.The agency hasn’t seen “evidence that supports that real shares were involved in the trades relating to the dividend refunds reclaimed in the Shah universe,” it said in a statement. “It looks like paper transactions with no connection to any real holding of shares.”Shah still reaps about 200,000 pounds ($250,000) a year from renting out his properties, he said, less than half of what he got before the arrival of Covid-19.The former trader faces additional heat in Germany, where prosecutors are probing him as part of a nationwide dragnet that’s targeted hundreds of suspects throughout the finance industry.Feeling RobbedIn Denmark, the case against Shah has triggered public anger. The country, which is in the middle of an economic recession wrought by the coronavirus, claims it has been robbed.“In a country like Denmark, and mainly in the times of Covid-19, it is of substantial importance,” said Alexandra Andhov, a law professor at the University of Copenhagen. The nation’s tax authorities have dealt with alleged fraud cases before but “not in the amount of $2 billion,” she said.Shah appeared at ease and upbeat while outlining how he’d be arrested if he tried to fly home to London. Married with three children and based in Dubai since 2009, Shah has spent the past five years engrossed in legal papers and talking to his lawyers, he said. To the authorities trying to extract him from his exile, he has a piece of advice: know your tax code.“It’s very nice to put somebody’s face on a front page of a newspaper and say ‘Look at this guy living in Dubai, sitting on the beach every day sipping a Pina Colada while you’re broke and you don’t have a job’,” he said. “I would say look at your legal system.”First StridesShah is hardly the only person ensnared in the European Cum-Ex scandal. German prosecutors have been more aggressive than their Danish counterparts and have already charged more than 20 people. At a landmark trial earlier this year, two ex-UniCredit SpA traders were convicted of aggravated tax evasion.One of them, Martin Shields, told the Bonn court that while he had made millions from Cum-Ex, he now regretted his actions.“Knowing what I now know, I would not have involved myself in the Cum-Ex industry,” said Shields, who avoided jail time because he cooperated with the investigation.A decade ago, Cum-Ex deals were wildly popular throughout the financial industry. Shah says he picked up the idea during his years as a trader in London for some of the world’s biggest banks.The son of a surgeon, Shah dropped out of medical school in the 1990s and moved into finance. He first observed traders exploiting dividend taxes while at Credit Suisse Group AG in the early 2000s, a strategy known as dividend arbitrage. Will Bowen, a spokesman for the Swiss bank in London, said “the lawsuits referred to relate to a period after Sanjay Shah worked at Credit Suisse.”Shah didn’t fully embrace Cum-Ex until he was hired by Amsterdam-based Rabobank Group several years later as the financial crisis was beginning to rip through the industry. Rishi Sethi, a spokesman for Rabobank, declined to comment on former employees.Big AmbitionsAfter being laid off, Shah says he received offers from several brokerage firms that included profit-sharing. But that wasn’t enough for him, so he set up his own firm.“I don’t want to make a share,” he said. “I want to make the whole lot.”That ambition was memorialized in the name that Shah picked for his company: Solo Capital Partners.Shah said he had about half a million pounds when he started Solo. Within half a decade, his net worth would soar to many multiples of that. According to his recollection, JPMorgan Chase & Co. also played a pivotal role in helping him get started because they were the firm’s first custodian bank. Patrick Burton, a spokesman for the New York-based bank, declined to comment.The scheme that Shah allegedly orchestrated was audacious. A small group of agents in the U.K. wrote to Skat between 2012 and 2015, claiming to represent hundreds of overseas entities — including small U.S. pension funds along with firms in Malaysia and Luxembourg — that had received dividends from Danish stocks and were entitled to tax refunds. Satisfied with the proof they received, the Danes say they handed over some $2 billion.Luxury HomesBut most of the money, authorities say, flowed instead directly into Shah’s pockets. The agents and the hundreds of overseas entities had merely been part of an elaborate web he’d created along with a series of dizzying “sham transactions” set up to generate illicit refund requests, according to the country’s claim in U.K. courts.Starting in January 2014, more than $700 million allegedly landed in Shah’s accounts. He funneled his wealth into property across London, Hong Kong, Dubai and Tokyo, Shah said, amassing a portfolio that he put at about 70 million pounds. He bought a 36-foot yacht for $500,000 in 2014 and called it Solo before upgrading to a $2 million, 62-ft model, the Solo II.Shah’s lawyers said in his latest filing in the London lawsuit last month that Solo — which went into administration in 2016 — provided “clearing services for clients to engage in lawful and legitimate trading strategies that were conducted at all times in accordance with Danish law.”They said that dividend arbitrage trading is a widely known and “wholly legitimate trading strategy.” Shah’s lawyers are also contesting whether Denmark has jurisdiction to pursue its claim in the English courts.It’s been five years since Shah learned he was facing a criminal probe, when the U.K. National Crime Agency raided Solo’s offices following a tip to British tax authorities from the company’s compliance officer.Slightly BoredHis lawyer at the time, Geoffrey Cox, told him in 2015 that he had nothing to fear and that it would all be over soon, Shah said. Cox, who would go on to become U.K. Attorney General and play a pivotal role during various Brexit crises last year, declined to comment.But instead Shah’s legal problems are just beginning. A mammoth three-part civil trial covering Skat’s allegations against Shah will start in London next year. The accusations are also at the heart of a massive U.S. civil case targeting other participants in the alleged scam.Criminal probes in Germany and Denmark are still rumbling on. While Shah said he hasn’t been contacted by the U.K. Financial Conduct Authority, the watchdog said in February that it’s investigating “substantial and suspected abusive share trading in London’s markets” tied to Cum-Ex schemes. A Dubai court threw out Denmark’s lawsuit against Shah in August, though it is appealing the decision.Back in Dubai, Shah said the ongoing saga is starting to wear him down.”It’s been quite nice spending time with the kids and family but now where I am, I’m just getting bored and fed up,” Shah said. “It’s been five years. I don’t know how long it will take for matters to conclude.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

,

Contact Us

Please use our Instant Quote form to see if you're pre-qualified for a non-recourse stock loan, or if you have any questions or feedback, please email, call or chat with us.

deals@internationalliquiditypartners.com

+44 20 3994 1588

Headquarters: Hunkins Waterfront Plaza, Charlestown, Nevis

Open 24 hours a day / 7 days a week / 365 days a year

 

 

 

Frequently Asked Questions

What Is Securities-Based Lending?
Securities-based lending, or a stock loan, is the practice of using market investments such as stocks, ETF’s, warrants, bonds, or real estate investment trusts as collateral for a loan.
How much money can I get for my securities?
Borrow up to 80% of the value of your pledged investments giving you the capital you need to expand your business, purchase real estate, or tackle a costly project.
What happens if my securities lose value?
With a non-recourse stock loan, you can walk away from your securities at any time and keep the loan money with no negative credit consequences even if the investments lose value.
Is my information safe with ILP?
We pride ourselves on outstanding service and make client confidentiality our top priority. You can always be absolutely certain your information is safe with us.
How long does it take for the disbursement of funds?
Most of the transactions we process take less than 7 days from application to the disbursement of funds giving you cash quickly when you need it most.
What credit score do I need to qualify?
There are no credit checks or personal guarantees necessary with our services. Your pledged securities are the only collateral required for the loan you receive.

Instant Quote

Please fill out your information to see if you are pre-qualified.

Enter the Stock Symbol.

Select the Exchange.

Select the Type of Security.

Please enter your First Name.

Please enter your Last Name.

Please enter your phone number.

Please enter your Email Address.

Please enter or select the Total Number of Shares you own.

Please enter or select the Desired Loan Amount you are seeking.

Please select the Loan Purpose.

Please select if you are an Officer/Director.

International Liquidity Partners, LLC may only offer certain information to persons who are “Accredited Investors” and/or “Qualified Clients” as those terms are defined under applicable Federal Securities Laws. In order to be an “Accredited Investor” and/or a “Qualified Client”, you must meet the criteria identified in ONE OR MORE of the following categories/paragraphs numbered 1-20 below.

International Liquidity Partners, LLC cannot provide you with any information regarding its Loan Programs or Investment Products unless you meet one or more of the following criteria. Furthermore, Foreign nationals who may be exempt from qualifying as a U.S. Accredited Investor are still required to meet the established criteria, in accordance with International Liquidity Partners, LLC’s internal lending policies. International Liquidity Partners, LLC will not provide information or lend to any individual and/or entity that does not meet one or more of the following criteria:

1) Individual with Net Worth in excess of $1.0 million. A natural person (not an entity) whose net worth, or joint net worth with his or her spouse, at the time of purchase exceeds $1,000,000 USD. (In calculating net worth, you may include your equity in personal property and real estate, including your principal residence, cash, short-term investments, stock and securities. Your inclusion of equity in personal property and real estate should be based on the fair market value of such property less debt secured by such property.)

2) Individual with $200,000 individual Annual Income. A natural person (not an entity) who had individual income of more than $200,000 in each of the preceding two calendar years, and has a reasonable expectation of reaching the same income level in the current year.

3) Individual with $300,000 Joint Annual Income. A natural person (not an entity) who had joint income with his or her spouse in excess of $300,000 in each of the preceding two calendar years, and has a reasonable expectation of reaching the same income level in the current year.

4) Corporations or Partnerships. A corporation, partnership, or similar entity that has in excess of $5 million of assets and was not formed for the specific purpose of acquiring an interest in the Corporation or Partnership.

5) Revocable Trust. A trust that is revocable by its grantors and each of whose grantors is an Accredited Investor as defined in one or more of the other categories/paragraphs numbered herein.

6) Irrevocable Trust. A trust (other than an ERISA plan) that (a)is not revocable by its grantors, (b) has in excess of $5 million of assets, (c) was not formed for the specific purpose of acquiring an interest, and (d) is directed by a person who has such knowledge and experience in financial and business matters that such person is capable of evaluating the merits and risks of an investment in the Trust.

7) IRA or Similar Benefit Plan. An IRA, Keogh or similar benefit plan that covers only a single natural person who is an Accredited Investor, as defined in one or more of the other categories/paragraphs numbered herein.

8) Participant-Directed Employee Benefit Plan Account. A participant-directed employee benefit plan investing at the direction of, and for the account of, a participant who is an Accredited Investor, as that term is defined in one or more of the other categories/paragraphs numbered herein.

9) Other ERISA Plan. An employee benefit plan within the meaning of Title I of the ERISA Act other than a participant-directed plan with total assets in excess of $5 million or for which investment decisions (including the decision to purchase an interest) are made by a bank, registered investment adviser, savings and loan association, or insurance company.

10) Government Benefit Plan. A plan established and maintained by a state, municipality, or any agency of a state or municipality, for the benefit of its employees, with total assets in excess of $5 million.

11) Non-Profit Entity. An organization described in Section 501(c)(3) of the Internal Revenue Code, as amended, with total assets in excess of $5 million (including endowment, annuity and life income funds), as shown by the organization’s most recent audited financial statements.

12) A bank, as defined in Section 3(a)(2) of the Securities Act (whether acting for its own account or in a fiduciary capacity).

13) A savings and loan association or similar institution, as defined in Section 3(a)(5)(A) of the Securities Act (whether acting for its own account or in a fiduciary capacity).

14) A broker-dealer registered under the Exchange Act.

15) An insurance company, as defined in Section 2(13) of the Securities Act.

16) A “business development company,” as defined in Section 2(a)(48) of the Investment Company Act.

17) A small business investment company licensed under Section 301 (c) or (d) of the Small Business Investment Act of 1958.

18) A “private business development company” as defined in Section 202(a)(22) of the Advisers Act.

19) Executive Officer or Director. A natural person who is an executive officer, director or general partner of the Partnership or the General Partner, and is an Accredited Investor as that term is defined in one or more of the categories/paragraphs numbered herein.

20) Entity Owned Entirely By Accredited Investors. A corporation, partnership, private investment company or similar entity each of whose equity owners is a natural person who is an Accredited Investor, as that term is defined in one or more of the categories/paragraphs numbered herein.

Please read the notice above and check the box below to continue.

Nevis Office

Main Street
Hunkins Waterfront Plaza
Charlestown, Nevis

New York Office

Coming Soon!

Market Coverage