LONDON: Denmark lost a fraud case in London's High Court on Thursday, in a blow to the country's efforts to recover 12.1 billion kroner ($1.9 billion) from a massive tax fraud scandal.
The Danish tax authority, known as Skat, brought the case to recover funds from defendants it said fraudulently claimed tax rebates using so-called "cum-ex" scams.
The schemes involve buying and selling shares around the time of dividend payments so quickly that the tax authorities are unable to identify the true owner, making it possible to illegally claim tax credits.
London's High Court ruled Thursday that the Danish tax authority had failed to prove it was "misled" by these tax rebate claims.
"Its controls for assessing and paying dividend tax refund claims were so flimsy as to be almost non-existent," the judge Andrew Baker said in his decision.
The main defendant was Solo Capital Partners, a London-based hedge fund founded by British trader Sanjay Shah, who was sentenced to 12 years in jail in Denmark last year.
Shah was convicted of running a nine-billion-krone "cum-ex" scam between 2012 and 2015, and the Danish court ordered that assets worth 7.2 billion kroner be confiscated from him.
In that case, the prosecution showed that dummy companies controlled by Shah pretended to own shares in Danish companies and received tax rebates for which they were not eligible.
The ruling in Britain has dealt a blow to Denmark's attempts to recoup funds.
The Danish tax authority said Thursday's ruling was a "source of surprise."
In May 2023, a Dubai court ordered Shah to pay Denmark's tax authority more than $1.2 billion.
"Cum-ex" scams, which take advantage of a loophole in European tax laws, have been uncovered in several EU countries.
According to Bloomberg estimates, the scams have cost European taxpayers up to 150 billion euros ($176 billion).
