I blew the whistle on massive tax fraud

“They’d meet us at airports in 20-foot limousines and take us to places like the Atlantis Hotel in Dubai or the Singapore Grand Prix. We’d spend a hundred thousand at the bar.”

In 2013 Jas Baines was an ambitious young lawyer enjoying the high life that came with working for a hugely profitable City hedge fund.

Today, he is unemployed and has lost most of his fortune after spending years fighting legal battles and trying to clear his name of a massive tax fraud.

The irony, he says, is that he publicized the fraud in the first place – only to become one of the targets of a £1.4bn lawsuit.

He reflected a month after case closed ending eight years of legal wrangling and one of the most valuable civil cases ever heard in the UK.

The Danish tax authorities were left licking their wounds after failing to establish that a large group of defendants, including Mr Bains, were responsible for huge losses it suffered.

It all started in 2009 when a banker named Sanjay Shah started a London-based hedge fund called Solo Capital. It also had offices in Dubai. It was one of a network of funds, banks and legal organizations that were to be heavily involved in the the so-called cum-ex trade.

This focuses on transactions where shares are sold by one investor to another immediately before a dividend is paid (total or with dividend) but delivered afterwards (ex-dividend).

Those involved took advantage of the delay in processing the sale to create confusion about who actually owned the stock at the time the dividend was paid. This tactic allowed both parties to claim rebates on withholding tax, a tax that was paid only once when the dividend was issued.

It was complicated on the outside, but for those involved it led to ever larger and more complex deals that ended up costing taxpayers across Europe billions.

It first became popular in Germany before spreading to other countries including France, Belgium, Italy and Austria. Solo Capital has targeted Denmark, with the majority of cum-ex deals taking place from 2013 onwards.

Jas Bains joined the firm in 2010 as its General Counsel, but continues to run the London office. At the time, Solo was “a successful company, making money in five or six different areas pretty well.”

And making money meant enjoying the high life, with staff traveling to places like Las Vegas, Singapore and Dubai.

“What I will say about Sanjay is that he knew how to throw a party,” he says.

“Once we were at the Ku De Ta Club at the Marina Bay Sands Hotel in Singapore. He bought 20 bottles of vintage Dom Perignon and people were just spraying each other with the stuff.

“People have likened him to The Wolf of Wall Street and stuff like that.”

It didn’t end there. “Sanjay is doing private concerts in Dubai with Prince. A little room with him and his friends for three or four million dollars a night… private concerts with Snoop Dogg.”

By mid-2014, however, Mr. Bains fell out with his boss and left the company for a competitor. At that time cum-ex transactions directed to Denmark increased sharply.

“I heard from people who left Solo that Sanjay was doing some big deals in 2014, but look, I’ve moved on, it didn’t have much to do with me,” he says.

“But then I heard that Sanjay actually did close to €100m in deals from Denmark in 2013, closer to €250m in 2014 and he was looking for a billion in 2015.”

Alarm bells were ringing.

“I thought that couldn’t be right. It’s not that I thought the deals were invalid or criminal in any way. It’s just that any country that has billions of euros siphoned off will be screaming bloody murder.”

Solo Capital was not the only company now targeting Denmark. Others were getting in on the act. Jas believed it was only a matter of time before the house of cards came crashing down.

“I was completely confident that I had done nothing wrong, but I knew that if it continued and erupted in spectacular fashion, I would be involved,” he explains.

With that in mind, in 2015 he decided to play.

He contacted a Danish lawyer, who in turn put him in touch with the Danish police. He went on to spend two and a half years helping them figure out how the cum-ex scam worked.

Danish prosecutors did not target Mr Baines. Their attention was fixed firmly on Mr. Shah. The 54-year-old was eventually extradited from Dubai to face fraud charges – and in December last year was sentenced to 12 years in prison.

It was the heaviest penalty ever imposed in Denmark for a fraud case. He is currently appealing.

But when the Danish tax authorities, Skatteforvaltningen (Skat), launched their mammoth case seeking recovery of the lost money, Mr Bain was one of more than 100 individual and corporate defendants initially targeted – along with Mr Shah.

With this lawsuit hanging over him, working as a lawyer or getting a role in the City of London is out of the question.

“It’s impossible to get a job if you’re being sued as part of a two-billion-dollar international tax fraud case,” he says.

However, in October, High Court judge Mr Andrew Baker dismissed Scat’s claims.

Admitting that “greed can be a powerful motive and I consider that there was considerable greed here”, he still concluded that Scat had failed to prove that he had been the victim of fraud.

“The authority’s control over the assessment and payment of dividend tax refund claims was so flimsy as to be non-existent,” he said.

This appeared to echo a statement previously made by Mr Shah in an interview with German television in 2021, which was also quoted in the decision:

“Why would they pay for years and years and then, after four years of payments, say, ‘Oh, we made a mistake or we were scammed,'” he said.

“If there’s a big sign on the street that says ‘please help yourself’ then I or someone else will go and help themselves.”

There may still be an appeal. But for Mr Baines, the decision provided much-needed closure – and, he says, a chance to move on.