THE £1.4BN TAX HOLE: REFLECTIONS ON DENMARK’S FAILURE TO RECOVER CUM-EX FUNDS IN THE UK

London’s financial district

1.    Introduction

The Cum Ex Scandals, often dubbed “the robbery of the century,” may continue to cast a shadow over the European financial landscape for a long time. These were complex multi-billion pound schemes designed to effect swift trading of shares close to the dividend dates in order to generate multiple tax refunds on a single dividend payment.[1] The bursting of such schemes, which have served as a conduit for the siphoning of about €55 billion, exposed serious loopholes inherent within the national tax and financial systems across Europe.

On the 2^nd October 2025, the decision by the UK High Court sitting in London refusing the Danish government’s attempt to recover about £1.4 billion allegedly lost to such a scheme underscores both the legal and institutional complexity of addressing transnational financial misconduct. The outcome of this judgment raises critical issues about jurisdiction, sovereign rights in foreign courts, and the adequacy of international cooperation mechanisms in dismantling this sophisticated tax fraud, as it is also called.

The wider economic and policy implications are equally profound. The amount of money involved in the schemes has not only strained public finances but also undermined public confidence in financial regulation and cross-border tax enforcement. Furthermore, the unsuccessful efforts by the affected states, like Denmark, to recover these losses through litigation in foreign jurisdictions reveal the subsisting gap in navigating divergent legal systems and the limits to extra-territorial enforcement schemes. This work will attempt to analyze these issues in the light of this recent judgment.

2.    Tensions and Conflicts (Tax avoidance vs Tax evasion)

This case illustrates the blurred boundaries and the inherent conflict between tax avoidance and tax evasion. Over time, this ambiguity has given rise to the defence’s familiar “grey area” argument framed as legitimate exploitation of legal loopholes and the prosecution’s contrasting “dark area” narrative, which portrays such schemes as outright criminal fraud, respectively. For a comprehensive discussion of these different areas, see the recordings of the international roundtables of the series “Compliance, Avoidance, and Evasion in Taxation.”

The complexity involved in determining whether specific conduct falls within one area or the other may lead to contradictory legal outcomes across jurisdictions based on the same set of facts. This is illustrated by the case in which the criminal prosecution in Denmark succeeded, while the civil proceedings in the UK failed.

3.    The “Dark Area” Narrative by the Prosecution

In Denmark, the prosecutors presented Shah’s hedge fund scheme as serious fraud, alleging it relied on falsified ownership claims and fabricated dividend documentation submitted to secure unjustified tax refunds of about £1.4 billion (€1.6 billion). Consequently, Shah was sentenced to 12 years in prison, which has been noted as the severest penalty ever imposed for financial crime in the country.[2] The prosecution’s case was firmly built on the “dark area” of criminal fraud, leaving no room for the defendant to argue that the conduct was a lawful or acceptable use of legal or economic opportunities.

Such a successful criminal prosecution with very severe punishment would be reasonably expected to yield another positive outcome for the regulatory authority in another jurisdiction. This is especially so when pursued on the same line of argument, although framed in civil proceedings. Such an expectation proved unfounded, as the proceedings before the UK courts failed, reflecting a distinct judicial approach grounded in different legal principles. In particular, whilst the Danish law allows the refund of dividend Withholding Tax (WHT), such practice is not allowed in the UK. Essentially, too, the UK court based its decision, among other key considerations, on the premise that the Danish regulatory body, SKAT, was not misled into making the refunds, and also the fact that it had very weak control measures.[3]

While the successful criminal prosecution in Denmark, which resulted in a criminal conviction, might reasonably create an expectation of a similar victory for the Danish tax authority (SKAT) in the UK, that expectation proved unfounded. Although the civil claim in London mirrored the arguments of the criminal case, it failed due to the distinct requirements of English tort law. Crucially, the UK court did not dismiss the claim based on differences in tax policy, but rather on the strict legal test for deceit. The High Court concluded that the defendants were not liable because SKAT failed to prove it was actually induced by the alleged misrepresentations. The judge found that SKAT’s internal processes were so mechanical and flawed that it paid out billions without relying on the specific details or representations in the claim documents. Ultimately, the court held that SKAT was not tricked into making the payments; rather, it had left the door wide open through its own lack of scrutiny. The English Court affirmed at paragraph 9 that “SKAT was not misled by misrepresentations made to it through the tax refund claims it received, as it alleged. Its controls for assessing and paying dividend tax refund claims were so flimsy as to be almost non-existent.”

4.    The “Grey Area” Defence by the Defendants: Exploiting Loopholes

Sanjay Shah’s defence was premised on the argument that his trading scheme merely capitalized on a “legal loophole” in Danish tax law rather than contravening it. In the judicial decision, the Court quoted an interview with Mr. Shah, which encapsulates his defence that he was merely taking advantage of a system that allowed it: “If there’s a big sign on the street saying, 'please help yourself', then me or somebody else would go and help themselves” (see paragraph 607).

His legal team characterized these transactions as sophisticated, lawful “dividend arbitrage” mechanisms that exploited ambiguities within tax treaties. While the defence initially challenged the UK court's jurisdiction to enforce foreign tax debts (the "Revenue Rule" under which English courts have no jurisdiction to entertain an action for the enforcement, either directly or indirectly, of a penal, revenue or other public law of a foreign state), this argument was rejected by the Supreme Court in the decision Skatteforvaltningen v Solo Capital Partners LLP [2024] A.C. 539, allowing the trial to proceed. In particular, the Supreme Court affirmed that that SKAT, as a victim of fraud, sought only the restitution of monies of which it had been defrauded and as such it could not be argued that seeking to recoup tax refunds erroneously paid was a claim to enforce a foreign tax law which, in substance, represented a claim to enforce Denmark's sovereign right to the tax.

Ultimately, the defence succeeded at the main trial not because the court validated this "grey area" or the extraterritorial enforceability of tax law, but because they successfully argued that SKAT was not actually misled. The court found that SKAT’s internal controls were so "flimsy" and mechanistic that the agency paid out refunds without relying on the specific representations made by the defendants, thereby breaking the chain of causation required to prove fraud.

5.    Barrier to Justice

The tension between legal systems culminated in contradictory outcomes across jurisdictions. While Sanjay Shah was convicted of criminal fraud in Denmark, the UK High Court on 2 October 2025 dismissed the civil claims brought against him by the Danish tax agency (SKAT). From the outset, the Judge emphasized that proceedings in his court would be determined solely by English law, irrespective of the convictions or judgments secured in Denmark, the USA, and Dubai.

This divergence highlights a structural clash in cross-border enforcement: conduct deemed criminal fraud in one state may fail to meet the strict liability requirements for civil deceit in another. In this case, the UK court did not validate the defendants’ actions; rather, it found that SKAT’s own “flimsy” and mechanistic payment processes meant it was not actually misled by the defendants' falsehoods, which represented a failure of causation fatal to a claim under English tort law.

The legal implications are significant. The court acknowledged the defendants’ dishonesty but was bound by the rigorous standards of English civil proof regarding inducement. This outcome exposes a lack of unified global standards, creating a gap where sophisticated actors can exploit systemic weaknesses. As the judgment noted, the defendants essentially saw a “big sign on the street saying, 'please help yourself,' and did so." Without greater synergy across global legal platforms, such “grey area” arbitrage schemes are likely to continue thriving in the spaces between national laws. 6.    Paradox of Punishment

Situating the contradictory outcomes raises the question of whether substantive justice has been served. The UK Court unequivocally agreed that the trading scheme deployed by Shah and his cohorts produced tax refund claims that were invalid under Danish law. The judge confirmed that none of the applicants were entitled to the billions they extracted. However, bound by the strict causation requirements of English civil law, the Court had to dismiss the case. The paradox lies in the reason for this defeat: SKAT lost not because the defendants’ conduct was lawful, but because SKAT’s own internal controls were so “flimsy” and mechanistic that the judicial authority found the agency was not actually misled. Because SKAT paid out the refunds without scrutinizing the applications, it could not prove it relied on the defendants’ lies. Consequently, despite the considerable resources invested in the litigation, the Danish tax authority ultimately obtained no remedy in the UK, offering a stark illustration of how sophisticated cross-border schemes may secure protection through strategic forum-shopping practices.

7.    Concluding Remarks

Based on the foregoing, it emerges that the current approach, which allows each jurisdiction to apply its national laws that may be distinct from others, as the UK has done in the case at issue, is not effective. A new approach that will collapse this identified gap and introduce a uniform enforcement system should be adopted. Until this major global collaboration is achieved, powerful entities and individuals whose primary objective is to maximise profits will continue to exploit similar loopholes to their advantage. Such a harmonized approach, shifting from reactive piecemeal litigation to proactive coordination, would strengthen the integrity of all national tax systems, particularly those vulnerable to exploitation due to administrative limitations or differing standards of proof.

Endnotes

[1] Theo Leggett & Michael Sheils McNamee, ‘Denmark loses £1.4bn tax fraud claim in UK court case’ BBC (UK 2 October, 2025) accessed at <https://www.bbc.co.uk/news/articles/cy852vyn054o>

[2] Adrienne Murray, ‘British trader found guilty of £1bn fraud’ BBC (Copenhagen 12 December, 2024) accessed at <https://www.bbc.co.uk/news/articles/cy478pgy171o>

[3] Theo Leggett & Michael Sheils McNamee, ‘Denmark loses £1.4bn tax fraud claim in UK court case’ BBC (UK 2 October, 2025) accessed at <https://www.bbc.co.uk/news/articles/cy852vyn054o>

Bibliography

Primary Source

SKATTEFORVALTNINGEN (the Danish Customs and Tax Administration) v SOLO CAPITAL PARTNERS LLP (in special administration) and many others, [2025] EWHC 2364 (Comm), available at https://perma.cc/GS36-WCEU

Secondary Sources

Alex Simpson, ‘The robbery of the century: the cum-ex trading scandal’ The Conversation (UK , 13 November, 2019) accessed at https://theconversation.com/the-robbery-of-the-century-the-cum-ex-trading-scandal-124417

Theo Leggett & Michael Sheils McNamee, ‘Denmark loses £1.4bn tax fraud claim in UK court case’ BBC (UK, 2 October, 2025) accessed at https://www.bbc.co.uk/news/articles/cy852vyn054o

Alistair Gray, ‘Denmark loses £1.4bn London tax fraud case’ Financial Times (London, 2 October, 2025) accessed at <https://www.ft.com/content/aeac7139-e4f2-48d8-a486-1b233893266a>

Azizur Rahman & Syedur Rahman, ‘Cum-Ex Trading Schemes Explained & FAQs’ Rahman & Ravelli accessed at https://www.rahmanravelli.co.uk/expertise/cum-ex-investigations/cum-ex-trading-schemes-explained-and-faqs/

Rob Harkavy, ‘Hedge fund founder sentenced to 12 years over tax scam’ iclg (Denmark, 13 December, 2024) accessed at https://iclg.com/news/22057-hedge-fund-founder-sentenced-to-12-years-over-tax-scam?utm_source=chatgpt.com

David Stern, ‘The CumEx trading scandal: What are the implications for the UK?’ 5 SAH (5 December, 2019) accessed at https://www.5sah.co.uk/knowledge-hub/articles/2019-12-05/the-cumex-trading-scandal-what-are-the-implications-for-the-uk

Rob Harkavy,’Dreadful day in court for the Danish tax authority’ iclg (England & Wales, 6 October, 2025) accessed at https://iclg.com/news/23133-dreadful-day-in-court-for-the-danish-tax-authority

CASEMINE, ‘Skatteforvaltningen v Solo Capital Partners LLP & Ors England and Wales High Court (Commercial Court) Oct 2, 2025’ accessed at https://www.casemine.com/judgement/uk/68dec4c9e5b2aa37aa8571cd

Video Recordings

Multimedia Centre, European Parliament, ‘Public hearing on “Cum Ex scandal; financial crime and the loopholes in the current legal framework”: extracts from the special committee on TAX III and ECON Committee…’ accessed at https://multimedia.europarl.europa.eu/en/video/public-hearingcum-ex-scandal-financial-crime_I164183

‘Compliance, Avoidance, and Evasion in Taxation: The Role of Professionals - The Gray Area; Part 1 - At the Crossroads of Tax Practices: Ethical Challenges and Democratic Issue’, (Corporate Crime Observatory, 8 September 2023) <www.corporatecrime.co.uk/professionals-tax-compliance-and-abuse>

‘Compliance, Avoidance, and Evasion in Taxation: The Role of Professionals - The Gray Area; Part 2 - The Conundrums of Tax Professionals: Technology, Whistleblowing, and Ethical Decision-Making’, (Corporate Crime Observatory, 11 October 2023) <www.corporatecrime.co.uk/professionals-tax-compliance-and-abuse> ‘Compliance, Avoidance, and Evasion in Taxation: The Role of Professionals - The Dark Area’, (Corporate Crime Observatory, 10 November 2023) <www.corporatecrime.co.uk/professionals-tax-compliance-and-abuse>

Download the Article in PDF format

CCO - Udoka Ezeobi (2025) UK CumEx Scandal Decision.pdf

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Suggested citation:

Bluebook: Udoka Ezeobi, The £1.4bn Tax Hole: Reflections on Denmark’s Failure to Recover Cum-Ex Funds in the UK, CORPORATE CRIME OBSERVATORY, (December 16, 2025), https://www.corporatecrime.co.uk/post/uk-skat-cumex-2025

Harvard: Ezeobi, U. (2025) ‘The £1.4bn Tax Hole: Reflections on Denmark’s Failure to Recover Cum-Ex Funds in the UK’. Corporate Crime Observatory. Available at: https://www.corporatecrime.co.uk/post/uk-skat-cumex-2025

OSCOLA: Udoka Ezeobi, ‘The £1.4bn Tax Hole: Reflections on Denmark’s Failure to Recover Cum-Ex Funds in the UK,’ (Corporate Crime Observatory, 16 December 2025), https://www.corporatecrime.co.uk/post/uk-skat-cumex-2025

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