Hedge Fund Trader Faces Extradition to Belgium in Cum-Ex Probe

Sanjay Shah, chief executive officer of Elysium Global Ltd., poses for a photograph at The Pointe on the Palm Jumeriah in Dubai, United Arab Emirates, on Tuesday, Sept. 29, 2020. Shah 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.
Sanjay Shah, chief executive officer of Elysium Global Ltd., poses for a photograph at The Pointe on the Palm Jumeriah in Dubai, United Arab Emirates, on Tuesday, Sept. 29, 2020. Shah 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.

(Bloomberg) -- A veteran trader with links to Cum-Ex “mastermind” Sanjay Shah faces extradition to Belgium as criminal probes related to the controversial tax strategy expand throughout Europe.

Guenther Klar, who previously worked for Shah’s Solo Capital hedge fund, is being sought for questioning by Belgian prosecutors as part of an investigation into Cum-Ex trading. A London judge is scheduled to rule on the request Thursday.

At least three countries, Belgium, Denmark and Germany, are seeking the extradition of London financial professionals related to Cum-Ex strategies. Prosecutors say investors illegally made billions of euros by rapidly trading shares to obtain multiple refunds on dividend taxes paid only once.

Klar would be the first trader extradited from the U.K. to another country as part of a Cum-Ex probe. Prosecutors want to question the 51-year-old in relation to an alleged 22 million-euro ($26.7 million) tax fraud, according to London court documents.

Kevin Robinson, a lawyer for Klar, said that the veteran trader “is not the subject of any prosecution or similar process in Belgium.”

“The Belgian authorities have made it clear in writing that the only purpose behind the request for extradition is to conduct an interview, nothing more than that is sought,” Robinson said in an emailed statement.

Robinson said that Klar has offered to be interviewed and has “already provided hundreds of pages of documentation demonstrating the true nature of his trading activities.”

“The offer to be interviewed has been declined which, given the admitted sole purpose of the extradition request, defies logic and casts serious doubt on whether this extradition request is being made in good faith,” the lawyer said.

Klar was arrested under a European Arrest Warrant while boarding a flight from Manchester airport in June 2019, according to court documents. He appeared at Westminster Magistrates Court in London the next day, and was released on bail.

Belgian prosecutors confirmed the proceedings in a statement. Extradition requests frequently take months, if not years, to resolve.

The Thursday court hearing comes as prosecutors throughout the continent are dramatically escalating Cum-Ex probes.

Read more: Hedge-Fund Manager Shah Doesn’t Want to Be a Cum-Ex Fugitive

Just last week, prosecutors in Denmark announced charges against Klar’s old boss, Shah, and a “presumed helper,” who hasn’t been identified. Shah has been called the “mastermind” of Cum-Ex by Danish officials. Shah has denied the charges and said he was working within Danish law.

Later this month, an employee at Duet Group is scheduled to appear at a London extradition hearing in relation to a Cum-Ex case.

Belgium alleges in the arrest warrant that Klar’s acts took place from June 2012 to May 2016. He worked at Solo Capital from 2010 through 2012, according to a U.K. Financial Conduct Authority database. He had worked at Royal Bank of Scotland Group Plc for a number of years before that.

“The Belgian state has very probably been defrauded out of over 22 million euros, of which 11 million euros were paid out as a result of unlawful reimbursements of withholding tax on dividends paid by Belgian quoted companies,” an investigating judge said in the arrest warrant.

Cum-Ex was a trading strategy that used the rapid trade of shares to gain duplicate tax refunds. The practice, named for the Latin term for “With-Without,” took advantage of how dividend tax was collected under laws that seemed to allow multiple investors to claim refunds on a dividend that was paid only once.

Read more: U.K. Regulator Investigating 14 Firms, 6 People in Cum-Ex Cases

Other countries have probes that aren’t as far along as the three that have already sought extraditions.

Austria is looking into 15 firms and 30 people, while Luxembourg is talking to seven investment firms and has conducted a series of raids. France’s financial prosecutor is carrying out fact checks, and the U.K. FCA is reviewing 14 firms and six people.