CL-2018-000297, CL-2018-000404, CL-2018-000590, - [2025] EWHC 2364 (Comm)

As noted in Appendix 3, Solo Model trading in 2014/2015 evolved from the 2012/2013 pattern through four main developments, but the basic concept and method was the same in substance.

First, the price hedge became an OTC forward rather than an exchange traded futures contract. This followed the resignation of Solo’s futures clearers and its inability to find another clearer willing to act. In Solo Model 2012/2013 trading, JP Morgan cleared matched pairs of single stock futures through the London Stock Exchange (‘LSE’). On 16 May 2013, a Compliance Officer at JP Morgan emailed Mr Pitts at SCP to inform him that JP Morgan had been contacted by the LSE about the matched and crossed business submitted by JP Morgan in April 2013, that is to say in fact some of the pricing hedges from Solo Model 2012/2013 trading. The LSE’s enquiry was said to be a routine matter, but as a result the JP Morgan Compliance Officer wanted to understand the rationale behind the futures trades it had cleared for SCP.

On 17 May 2013, Mr Pitts forwarded the JP Morgan email to Mr Dhorajiwala and Mr Forsyth, copied to Mr Horn, asking for input and giving his view on what was probably happening: “It looks like some of the crossing business is triggering market abuse flags at the exchange.” In a prompt reply to all, adding Sanjay Shah as well, Mr Dhorajiwala provided the trade details Mr Pitts had requested, courtesy of Mr Forsyth, and said he had just had a call from JP Morgan, leading him to propose: “Can we get together to discuss? I’ll skype you all in 5.”

The upshot was a reply to JP Morgan on 22 May 2013, sent by Mr Pitts but drafted by Mr Dhorajiwala and approved by Sanjay Shah, stating that:

“As part of our [GSS] business, [SCP] provides clients with a futures clearing service through an omnibus client account held with JPM. Our client base is purely institutional and made up primarily of brokers and institutional investors. The commercial rationale behind the business is to charge clients a premium for a facility to clear through a Global Bank such as JPMorgan where they would not normally have direct access to such a provider. The business has been running for over a year now and continues to be profitable. Significant resources have been deployed to build adequate control systems and risk is closely managed by ensuring that we only clear equal and opposite trades crossed by a third party broker.”

That was a misleading description of the Danish cum-ex trading and the part played in it by the matched futures that SCP was getting JP Morgan to clear. Mr Dhorajiwala, Mr Horn and Sanjay Shah all knew that it did not give JP Morgan a fair or accurate description of the business rationale of the futures, which were in fact a price hedge on the equity leg of an aggressive cum-ex tax arbitrage strategy coordinated by SCP. I find that it was put forward to JP Morgan to avoid revealing that that was the truth of it, as they envisaged that JP Morgan would not wish to be connected to that type of activity.

The relevant enquiry will have been triggered by the fact that at the Exchange, matched ‘buys’ and ‘sells’ will have been observed, posted by JP Morgan for the same JP Morgan client account (i.e. SCP’s account). I accept evidence Mr Dhorajiwala gave that therefore, and as was explained to him in telephone discussions with JP Morgan, the key point for them was whether there were separate interests buying and selling, sitting behind SCP, for whom in turn JP Morgan was acting as General Clearing Member on the Exchange. The question in the JP Morgan Compliance Officer’s email, however, was not so narrowly framed; and the knowingly false answer is not excused by the fact that the question it addressed might have gone beyond the narrow point that triggered an alert.

I also accept evidence Mr Dhorajiwala gave in re-examination that through other lines of correspondence with JP Morgan, it was made aware that the SCP clients trading futures were not banks or substantial investment funds, as calling them “institutional investors” would be likely to convey. I cannot say on the evidence whether that discrepancy was identified by JP Morgan, or whether it otherwise identified or suspected the truth about the futures trades it had been clearing for SCP.

Whether it was satisfied by or had concerns over the business rationale provided by Mr Pitts, as to which I make no finding, in the event, on 1 August 2013, JP Morgan gave notice of the termination of its custody and clearing agreement with SCP.

SEB took over the role as futures clearer but again concern as to the underlying business surfaced. On 5 August 2013, a representative from SEB’s sales and marketing team emailed Ms Spoto at GSS to say that SEB’s risk team had questioned the fact that there seemed to be “no volume traded or open interest on the SSF [single stock futures]”, and so asked if it was possible “to give a bit of background to give risk some comfort”. That email was copied to, among others, Sanjay Shah and Mr Dhorajiwala. Mr Shah replied that “For single stock futures, there is typically no open volume at the exchange. Our clients will be buying and selling OTC with each other, and the exposure will be no more than 50k lots at any one time. The buying and selling interest won’t be shown to the open market on screen, but will be reported to the exchange as they are crossed.” (The immediate context of this exchange was a trade in relation to Belgian shares, but by its nature the concern over what underlay the matched futures trading was not specific to that jurisdiction.)

Two weeks later, there was an exchange of emails between SEB and SCP (for whom Mr Dhorajiwala took the lead) about whether, once crossed, the equal and opposite futures could be closed out, as Solo had requested, or had to be left open. SEB’s Head of Sales and Client Services took the view that, assuming there were two separate underlying clients on opposite sides of the futures trade, then the trade should not be closed out just because there was a complete match. Closing out, in their view, caused misreporting to the Exchange as SEB were then “not reflecting to the exchange the existence of one long and one short position in this contract”. Mr Dhorajiwala yielded to that view, saying on 2 September 2013 in relation to the contracts then most recently traded that “We will continue to leave them open so long as clients wish to keep their open interest position”. This was misleading spin, making it appear as if the two sides of the position might be acting, and might act in relation to their open positions, other than in tandem, as orchestrated by GSS.

On 28 November 2013, SEB’s compliance department forwarded to SCP, by email addressed to Sanjay Shah, among others, an incident report from the Exchange flagging the possibility that futures trades SEB had cleared for SCP represented a ‘wash trade’. The email said that SEB’s own monitoring system had also generated alerts for the relevant trades. SCP was asked to confirm that the buy and sell sides of the trades were executed on behalf of different clients and that those clients had different underlying interests. Sanjay Shah confirmed both elements by reply email the same day.

I infer that SEB’s risk management or compliance concerns were not alleviated entirely, because on 13 February 2014 SEB informed Sanjay Shah by telephone that it was not able to act as clearer for single stock futures crossing.

SCP also began a relationship with Citigroup Global Markets (‘Citi’) for futures clearing, developed from around September 2013, and Citi began clearing futures in relation to Danish shares in mid-November 2013. But on 26 November 2013, Citi asked a number of questions about SCP’s business model, including whether the trading was around or close to dividend record dates and whether the purpose was to make tax reclaims. In due course, this led Solo to share a draft legal opinion that might be provided by Hannes Snellman, the Danish firm to which I refer below, to try to get Citi comfortable with the trades. However, on 21 January 2014 Citi explained that the draft opinion “lack[ed] any description of the economic reasons for engaging in such purchases and sales of futures over the record date”, such that it was “of no help in evaluating the tax or franchise risk to Citi of these transactions”. Citi was not persuaded to change its view following a telephone discussion and it did not clear any further futures for SCP. Sanjay Shah was closely involved in this, and I do not accept evidence he gave in cross-examination claiming otherwise.

The factual basis given to Hannes Snellman and recited in the draft opinions included inaccurate descriptions of important elements of the Solo Model. In my judgment, that was deliberate on Mr Shah’s part because he did not want to disclose to Citi that this was coordinated cum-ex trading, organised centrally by Solo’s GSS team for the purpose of facilitating tax refund claims by the equity buyers and having no business rationale other than the creation of such claims. Thus:

The SSDs put a false spin on this interaction with Citi in their Defence. It was claimed that the Solo Model had been disclosed to Citi and that Citi had identified it as a competing business, causing it to decline to continue clearing single stock futures for SCP; and that was then alleged to have “reinforced Mr Sanjay Shah’s genuine and honest belief that the trading structures deployed in the GSS business were genuine, legitimate, would result in the [equity buyers] becoming shareholders in Equities for Danish tax purposes and permit [them] to make valid [tax refund claims]”. I consider that to have been all fiction.

The difficulties in finding an external clearer prompted the switch from futures to OTC forwards for the 2014 dividend season as OTC forwards did not need to be cleared by an external bank.

The second evolutionary change in the Solo Model for 2014/2015 was the use of additional parties, creating more links in the transaction chains and greater complexity, as described in Appendix 3. There was no legal or business reason for any of these changes. They represented an escalation of the obfuscatory effort to which I referred in paragraphs 153 to 155 above, to facilitate an escalation of scale in Solo Model activity. Those changes did not alter the reality, however, that the trading continued to be centrally coordinated at Solo, and constructed so that it would settle to zero in the absence of either cash or shares, all with the sole purpose of generating tax refund claims.

In cross-examination, after initial prevarication and unconvincing invention, Sanjay Shah conceded that having multiple Solo custodians with different addresses, and different-looking CANs, was an exercise in creating obscurity, but he insisted that he was not concerned to obscure anything from SKAT:

“MR RABINOWITZ: … So opacity was the order of the day Mr Shah, yes?

A: As regards competitors, yes.”

I do not accept that the concern here was competition. For 2014 and 2015, Mr Shah did have an eye on competition, from the DWF Ds and their Maple Point Model trading, but I do not consider that competitive activity to have formed part of the motivation towards increased complexity whereby to obscure what was happening. I accept submissions by SKAT, and find, (i) that the purpose behind all the complicating features in Solo Model 2014/2015, not just the multiplicity of custodians, was obfuscation, and (ii) that the only purpose for that deliberate obfuscation was to reduce the chance that SKAT might wake up to how much tax reclaim business was coming its way from a single effective source, i.e. Sanjay Shah’s GSS business, or that the FCA might take a dim view of such activity and intervene to stop it. However, I do not accept SKAT’s submission that that was in turn driven by a belief or understanding that a fraud was being practised on SKAT.

Nor though do I accept Mr Shah’s claim that he thought he was cleverly using a legal loophole in Danish tax law. In my judgment, he thought the tax refund claims might well not be valid claims, so that if SKAT ever challenged them or stopped paying that would be an end of the very lucrative business he had developed, and he assumed that SKAT would challenge claims or stop paying if the centrally coordinated nature of the Solo Model business became apparent to it (although, in the event, that was not said by SKAT in these proceedings to have invalidated the claims).

To facilitate the use of these more complex structures, additional counterparties were recruited, for example further short sellers, further stock lenders, and now forward counterparties. They were recruited in part from existing participants in the Solo Model and in part from new participants. For example, in 2014, Messrs Oakley and Mitchell, and Dilip Shah, each incorporated three new short sellers, Mr Murphy incorporated four new short sellers, Mr Smith incorporated six new entities to act as stock lenders, and Mr Körner brought new companies to participate. Also in 2014: Jason Browne (formerly of GSS) incorporated four new short sellers; Mr Klar’s company, Amalthea, which had been a Solo Model stock lender in 2013, acted as a forward counterparty; and the other forward counterparties were all incorporated by their principals to participate in Solo Model trading.

The third significant development for 2014/2015 was the scale of the Danish tax reclaim industry that the Solo Model became, as summarised in paragraphs 192 to 208 below, such that over 90% of the amount paid by SKAT in relation to the Solo Model came from 2014/2015 trading (DKK8.306bn, 92% of the Solo Model total).

In mid-2013, Mr Stein and Mr L’Hote left Argre to pursue cum-ex business separately through what became the Maple Point Model. Messrs Markowitz, Van Merkensteijn and Klugman incorporated 40 new USPFs for themselves, their friends and family, in July 2014, 39 of which traded under the Solo Model (the ‘New Argre Plans’) in place of the Original Argre Plans.

At about the same time, Sanjay Shah made efforts to find more US individuals who had or could establish USPFs that might participate in Solo Model trading. On 30 July 2013, in New York, as a result of Mr Devonshire’s introduction of Mr Fletcher to Mr Murphy, Sanjay Shah, with Mr Murphy, met Mr Fletcher and some of his work colleagues at a brokerage called Standard Credit: Mr Bradley, Mr Tucci, Mr Vergari, Mr Driscoll and Ms Anderson (the ‘Standard Credit Individuals’). Mr Shah described the opportunity as USPFs engaging in div-arb trading in Danish stocks in order to seek a tax refund. He did not explain that the opportunity was structured around cum-ex purchases by USPFs, or the detail of how the trades would be structured and settled. Mr Fletcher and the Standard Credit Individuals and their friends/family set up 31 USPFs, 10 of which traded under the Solo Model from late 2013 and others of which traded only in 2014/2015 (the ‘Standard Credit Plans’).

This New York recruitment trip is significant. Mr Shah had no reason to suppose that any of the Standard Credit Individuals would be willing to participate in a fraud. Neither did Mr Murphy or Mr Fletcher; and neither did Mr Devonshire have any reason to suppose that his long-standing good friend Mr Fletcher would have any interest in being involved in a fraud. I find that whatever was said to Mr Devonshire, causing him to put Mr Murphy in touch with Mr Fletcher, and whatever was then explained to Mr Fletcher and the Standard Credit Individuals, did not cause them to think that the Solo Model was or might be a means for practising fraud upon SKAT. Moreover, I consider it highly unlikely that Mr Shah would have gone about this client recruitment as he did if he had understood that what he was selling was in fact participation in such a fraud.

In relation to these introductions, initially Mr Murphy was paid 15% of the net profits of the USPFs’ tax reclaims, from which he made smaller payments to the Standard Credit Individuals and to Equilibrium Capital, an entity majority owned by Mr Devonshire of which Mr Fletcher was a director. I accept Mr Fletcher’s evidence that in the late summer of 2014, he agreed new terms with Sanjay Shah, having learned that Mr Murphy had dealt dishonestly with him in relation to the introduction of the Standard Credit Plans. He and Mr Devonshire would be paid US$1m per USPF for new introductions, to be paid in each case once the USPF had been set up, taken on by GSS as a client, and successfully traded. Fletcher-Devonshire companies received US$20m under that new arrangement (for 20 new USPFs at US$1m each), of which c.US$3.6m was paid on to Messrs Tucci and Bradley.

Messrs Tucci and Bradley later made their own direct arrangement with Sanjay Shah to be paid for introducing further USPFs, which were set up in December 2014 (the ‘Further Tucci/Bradley Plans’). Messrs Tucci and Bradley, through corporate vehicles, were paid c.US$10m for this by Ganymede or the mini-Ganymedes (as defined in paragraph 233 below).

In around October 2013, Sanjay Shah invited Mr Godson, at the time a partner in the broker FGC, to introduce potential investor clients for GSS, in return for a commission or fee. This led to the introduction of another 24 new USPFs (the ‘Godson Plans’). Mr Godson was the beneficiary or trustee of 13 of the Godson Plans, and he was paid €9,659,761 by Ganymede, some of which he paid on to the other individuals he had introduced.

At some point in 2014, Sanjay Shah agreed to pay introducer fees to one of the individuals introduced by Mr Godson, Gavin Crescenzo, as a result of which Mr Crescenzo’s companies were paid US$1.4m for the introduction to GSS of yet further new USPFs for Solo Model trading (the ‘Further Crescenzo Plans’).

Roger Lehman, mentioned in paragraph 128 above, was initially hired by Solo in 2013 to assist in the tax reclaim process for USPFs trading under the Solo Model, but also acted as trader for some of the USPFs, including those of Mr Fletcher and Mr Godson. Sanjay Shah subsequently agreed to pay Mr Lehman US$1m for introducing his own USPF (Valerius) and US$700-800k for each further new USPF introduced in 2014. As a result, Mr Lehman, friends of his, and his brother Kevin and friends of his, set up between them 20 USPFs that traded under the Solo Model in 2014/2015 (the ‘Lehman Plans’).

Also during 2014/2015, as noted in Appendix 3, the GSS cum-ex tax reclaim business expanded to Labuan. Some 24 LabCos were established, with the assistance of Labuan corporate service providers, to participate in Solo Model trading. They fall into two groups:

Again as noted in Appendix 3, Solo Model 2014/2015 trading involved four Solo custodians, rather than only SCP. The additional custodians were Telesto, incorporated by Solo in October 2013, West Point, 90% of which was acquired by Hooloomooloo, part of the Elysium Group, in September 2013, and Old Park Lane, acquired by Solo in mid-2014. Old Park Lane issued CANs from August 2014 in respect of Solo Model 2014/2015 trades on which it had acted as custodian; Telesto and West Point each did so from February 2015. As noted in paragraph 117(ii) above, SCP and the other Solo custodians shared middle/back office functions which were serviced by the Solo GSS team at SCP, later Genoa. Reflecting this, most of what Old Park Lane, West Point and Telesto charged in custody fees was passed on to SCP; and SCP also received the proceeds of successful refund claims supported by Old Park Lane, West Point and Telesto CANs, for onward distribution (mostly to Ganymede).

In conjunction with the expansion of the Solo Model business, Sanjay Shah sought control of or exclusivity with some of the Tax Agents and brokers:

To facilitate and accelerate the expansion of the Solo Model business, during 2014/2015 increasing automation was developed and implemented. That was a longer-standing goal for Sanjay Shah, but it received particular impetus after, in March 2013, some unwind phase transactions were not matched properly so that some first phase traded positions were not unwound.

On (Friday) 8 March 2013, Sanjay Shah emailed Mr Dhorajiwala and Rajen Shah that: “today’s trades/activity is in meltdown for about a dozen different reasons. Pogo [Mr Patterson], Nirav [Patel] and me are in the office trying to sort. I have said a million times before that we need a system. We need a developer hired asap”. Mr Shah asked Mr Patterson and Mr Patel for a timeline of what had gone wrong; and on the following Monday (11 March 2013), Mr Patel sent the requested timeline to Rajen Shah and Mr Dhorajiwala. He identified a number of issues that had arisen with the trading including issues with SCP’s systems, participants in the Solo Model failing to respond, and entry errors in the system. After this, developers were recruited by SCP to automate the GSS systems, namely Stuart Ervine, Albert Lacatz and Darren Hoggs. They were later reorganised into a different Sanjay Shah company, Theorem, working from the same office used by GSS, as reorganised into Genoa.

The first automated system was the Trade Approval System (‘TAS’), into which trades were inputted for approval, at first manually and later fully automated. This was in operation in 2013. It was updated and refined over time.

From late February 2015, two other systems came into use: (a) Brokermesh, used by the brokers, which matched orders and sent automated confirmations by email, all confirmed orders being executed at the published closing price for the Danish stock in question; and (b) Octave, an automated email system that included static data such as Danish companies’ dividend dates and amounts, and generated matched orders for all the trading counterparties (buyers, short sellers, stock lenders, forward counterparties). Octave could access and communicate with Brokermesh. As Ms Spoto of GSS explained on 23 February 2015 in an email to Mr O’Carroll, the trader for the IPG Individuals’ LabCos, those entities having “put a trade schedule in place”, “the new algo system will automate this. You will NOT need to contact anyone … unless the system goes down at any stage. …”.

The operation of the fully automated system can be illustrated by Sample Trade Solo 4 (see Appendix 3, below, at paragraph 18ff). All emails from Octave were sent from a single email address, [email protected]. Each was addressed to a designated email address for the addressee and set out a message to that addressee written as if it was a message from another Solo Model participant, to whose designated email address the email was copied. So, for example (and taking the initial trading phase as sufficient illustration), on 26 March 2015, the Solo 4 dividend declaration date:

These automated systems covered each of the Solo custodians, SCP, West Point, Old Park Lane and Telesto.

SKAT sought to make something of the fact that, in the manner just illustrated, Octave generated messages pretending that active processes of supply and demand, offer and acceptance, were in play, with parties looking to do trades and brokers looking to find liquidity, match principals, and confirm having done so. I agree that was all pretence; no doubt it would have been possible to design an automated trading system that documented things differently, for example it might just issue trade confirmations for trades that the embedded code ‘decided’ to allocate to participants within (it would have to be) parameters defined by the participation agreements, so as to commit the participants to such auto-allocated trades. But the pretence was transparent from the email correspondence that Octave generated. In other words, to put it less pejoratively, it was quite plain – and would have been so to any outside party, such as an auditor or regulator, if they looked at the trading records – that this was an automated system creating trades without input from the parties at the time of trading, programmed to document those trades in a way that mirrored non-automated trading processes.

I therefore do not find anything suspicious or untoward in the automation, or its detailed implementation, in itself. Its real significance, in the context of the Solo Model trading, is how it manifested the lack of real-world constraint upon the volume of trading, and consequent tax reclaims, that could be generated by using balanced, self-fulfilling, share-less settlement loops.

In April 2015, Anne Stratford-Martin (‘Ms Stratford’), a qualified lawyer by original background who had been CEO of SCP since January 2014, recruited by Sanjay Shah from Cantor Fitzgerald, although in truth Sanjay Shah continued to operate as de facto CEO of SCP for the GSS / Solo Model business, reviewed the draft opinion letter from Hannes Snellman to which I referred in paragraph 183 above (strictly, a slightly revised version of it provided by Hannes Snellman in February 2014 of which no use had been made). Ms Stratford first saw that draft opinion in late January 2015, when she was considering an enquiry from a Wall Street Journal journalist, Jenny Strasbourg, investigating Solo’s German and Danish cum-ex strategies.

SCP’s then General Counsel, Michael Herron, proposed that there should be a board paper, supported by legal advice, “in relation to the position under relevant tax laws as regards dividend arbitrage operations for which GSS was acting as the clearing agent”. That led Ms Stratford to look at the draft opinion letter from Hannes Snellman in detail in April 2015. Her review, as reflected by her marked-up comments sent to Priyan Shah and Gerard O’Callaghan on 20 April 2015, identified inter alia that:

No further legal advice was sought, either to address Ms Stratford’s concern about the adequacy of the draft opinion she had reviewed, or at all. Available records show that Ms Stratford and Sanjay Shah had a 44-minute telephone discussion on 21 April 2015, the day after she sent her comments on the draft opinion letter to Priyan Shah and Mr O’Callaghan. Mr Shah’s evidence was that he has no recollection of that call, and that it was unlikely that they discussed the draft opinion letter and Ms Stratford’s comments on it, as that would indeed have been a matter, at the time, being considered by the other Mr Shah and Mr O’Callaghan. I do not accept SKAT’s invitation to reject that as implausible. To the contrary, it is in my view both inherently plausible and supported by the fact that Ms Stratford’s email the previous day was not sent to Sanjay Shah, said that it followed a conversation she had had with Priyan Shah and Mr O’Callaghan on 20 April 2015, and asked for a further discussion with them the next day, i.e. 21 April 2015. It is of course plausible that in a long call with Sanjay Shah on that day, Ms Stratford might have mentioned that she was discussing what Hannes Snellman had said in the past with the other Mr Shah and Mr O’Callaghan; but it would be speculation, not a finding based on evidence, to say on that basis that the subject was mentioned on that call; and on any view the story around what must have been discussed that was put to Sanjay Shah by SKAT was speculative.

SKAT’s further, and imaginative, speculation was that Ms Stratford’s mark-up of the draft Hannes Snellman opinion letter, discussed (as SKAT would have it) in her call with Sanjay Shah the following day, was the catalyst for agreements Mr Shah made with Ms Stratford a month later to pay her £5 million, and Messrs Knott and Hoogewerf £2 million each. SKAT submitted that these were agreements for ‘hush money’ to buy the silence of Ms Stratford, Mr Knott and Mr Hoogewerf, about (as SKAT alleged) the fraud being perpetrated through Solo Model trading against SKAT (and other tax authorities). Mr Knott and Mr Hoogewerf each maintained that his agreement, agreed with Ms Stratford and negotiated by her with Sanjay Shah, was by way of retention bonus, documented as a loan but on the agreed understanding that it would be forgiven (i.e. repayment would be waived) if he had not left Solo by choice prior to the repayment date.

Ms Stratford pleaded an equivalent position in her Defence, as regards her £5 million. Ms Stratford was not a trial defendant, the proceedings against her having been stayed by consent between her and SKAT. Neither SKAT nor any defendant called her as a witness, so I had no evidence from her at trial. Sanjay Shah also maintained that the agreements were to incentivise Ms Stratford, Mr Knott and Mr Hoogewerf to stay at Solo, but he denied that there was any agreement about forgiving the loans if they did stay.

Save to confirm that I do reject as speculative SKAT’s suggestion that Ms Stratford’s consideration of the Hannes Snellman draft opinion letter had any connection to these agreements, I set out here only a few further basic facts relating to them, as follows:

As in relation to the Belgian tax authority’s enquiry in 2013 (see paragraph 158 above), without having pleaded any relevant case concerning them, SKAT cross-examined Sanjay Shah about enquiries of Solo received in June 2015 from the LSE, to whom all Solo Model equity trades (i.e. the purchase trades) were routinely reported, and the FCA, the regulator of SCP and the other Solo Model custodians. Those enquiries were mentioned in SKAT’s pleading, but only to say that SKAT would rely on the fact that Sanjay Shah dealt with them in support of its case that he remained the relevant directing mind and will of SCP (and related entities) notwithstanding Ms Stratford’s role as CEO in London. Therefore, as with the Belgian tax authority enquiry, I treat the cross-examination as going, if it went anywhere, only to Sanjay Shah’s credibility.

On 1 June 2015, the Market Supervision Department of the LSE asked SCP, Telesto and West Point to confirm that equity trades for TDC shares reported to the LSE on 27 May 2015 were “good trades”. These will have been trades for an unwind phase within the Solo Model. TDC had declared a dividend of DKK1 per share on 5 March 2015; and SCP, Telesto and West Point between them had been the custodian for 102 automated Solo Model trades around that dividend declaration date for an aggregate volume of 292,689,111 shares, some 36% of TDC’s total issued share capital at the time. The enquiry was passed up to Ms Stratford in London, who passed it on to Sanjay Shah for instruction on how to respond (hence SKAT’s reliance on this in support of its well-founded argument that Sanjay Shah was the directing will and mind of the custodians in relation to the GSS / Solo Model business). At Mr Shah’s direction, Ms Stratford caused confirmations to be given to the LSE that the trades were indeed “good trades”.

The LSE made a slightly fuller enquiry on 3 June 2015 in relation to 24 trades for Danske Bank shares reported that day, which again were unwind trades in the Solo Model, this time in respect of original trading around the Danske Bank dividend declaration on 18 March 2015. The 24 trades were each for 1,886,972 shares at DKK198 per share, after noting which the LSE’s email continued, “It’s quite unusual to [see] so many large trades at the same size and price; please could you confirm whether they are good trades, and if so, help us to understand the strategy behind these reports?”. An accurate response would have confirmed that the trades were “good trades” and explained that they were trades to unwind positions traded in March as part of a cum-ex trading strategy in relation to Danish shares. The response sent, as directed by Sanjay Shah, was a misleading half-truth: “We can confirm that the trades are good trades. Please be aware that the reported trades are the unwinding by clients of their positions [true]. They follow the closure of clients’ OTC derivative hedges which were closed with the clients’ brokers at the market closing price [misleading spin]. We as clearer had imposed a limit of €75m per ticket as so [sic.] you see the trades occurring in batches of the same size [misleading spin]. All trades were executed OTC by the clients’ brokers [half-truth at best, cloaking Solo’s role as director of all trading, and a gross spin on the fully automated Solo Model then in operation].”

In response, the LSE asked for clarification, and at Sanjay Shah’s direction was given the following response (questions posed by the LSE, answers added in reply):

“• Were these market facing trades? These trades were OTC and Broker facing

• Was there a change of legal ownership? Yes

• Was there a change of beneficial ownership? Yes”

The first answer was again a half-truth masking the reality that all trading was directed by Solo, now on a gargantuan scale via automation. The second and third answers were not true.

The LSE remained curious and set up a call with Alan Hadley (then Deputy Head of Compliance at Solo), on which, to reassure Sanjay Shah, Ms Stratford stood over Mr Hadley so she could, as she put it to Mr Shah in a Skype message, “stop the conversation if it strays beyond providing the answers we have already provided”. Although to his discredit Sanjay Shah refused to accept this in cross-examination, the obvious purpose was to ensure that as little information as possible about the Solo Model was disclosed.

On 11 June 2015, the LSE sent another email, attaching a simple table showing for each of 10 securities that the aggregate traded volumes reported by SCP between 1 May and 4 June 2015 represented significant percentages of the total issued stock, ranging between 5.01% to 25.42%. The email said that those traded volumes had resulted in several queries from the market, that the same applied for Telesto, Old Park Lane and West Point, and that the LSE wanted “to understand the origination of these trades; how the business was generated at the client level and the process in chronological order from the start to the point of trade reporting.” An accurate response could only have been to say that Solo was coordinating a cum-ex trading strategy to profit from tax refund claims, using automated processes to trade very large volumes, and the trades in question were part of the unwind phase of that strategy. Sanjay Shah instead approved, as a “good idea”, a proposal by Ms Stratford to say that “since we believe clients are taking advantage of tiny price differences by default the volumes are large to make the returns meaningful. Clients are not exposing themselves to market risk by undertaking such large trades as they are ensuring they are fully hedged.”

The full response, approved by Sanjay Shah and sent at his direction (via Ms Stratford) by Mr Hadley, was thoroughly dishonest:

“We have spoken with some of our clients and explained that we need to respond to your query. The clients are reluctant to share their intellectual property with us but we understand that the equity trades which we report are the hedges to OTC derivatives. The clients advise that their books are fully hedged for market risk.

(Nothing in the first two sentences was true. Solo’s clients had neither input nor even knowledge of these LSE enquiries. The party with ‘intellectual property’, who was indeed unwilling to share it, in my judgment vehemently so, was Sanjay Shah. On a point of detail for the second sentence, of course, in ordinary logic, if Product A hedges Product B, equally Product B hedges Product A. But it was misleading to suggest that there was a derivatives trading strategy, as part of which equity trades were used to hedge market risk.)

The motivation for trading is to take advantage of the small differences in the implied financing rates in the OTC derivatives market and the stock lending market. The clients buy or sell equities, which are then borrowed or lent on to their stock lending counterparties.

(The second sentence, taken on its own, could have been true. But it was in the context of Solo’s prior confirmation that legal and beneficial ownership of equities was transferred, making it misleading. The first sentence was false. Small pricing differences of that kind could in theory have been the target of an arbitrage strategy of some kind. But not only was that not the trading strategy in the Solo Model, the impact, if any, of those differences on how Solo Model trades would turn out was retrospectively adjusted out.)

Chronologically, it appears the equity hedges are only initiated when the clients have an OTC derivative and stock lending trade which they would like to execute.

(This was dishonest nonsense, given Sanjay Shah’s understanding of the Solo Model trading strategy, design and implementation.)

The clients noted that the trade volumes are not unusual compared to previous years.

(This was substantially false. First, again, Solo’s clients had not ‘noted’ any such thing, having not been involved at all in how the LSE’s enquiries should be answered. Second, while the total Solo Model traded volume being unwound in May-June 2015 (from trading around February-March 2015 dividend dates) was similar to the total traded volume for the whole of 2014 (c.2.3bn vs. c.2.1bn), it was larger by an order of magnitude against 2012 (c.79m, albeit only from the smaller second half of the year) and 2013 (c.381m for the full year).)

It is worth noting that the volume reported doesn’t reflect that we have many (over 100) clients trading so that each client’s volume is small compared to the overall volume that is reported.

(That was true but misleading, given that the large number of trading clients was a deliberate construct of the Solo Model precisely to mask the fact that a huge volume was being traded on a coordinated basis by Solo.)

We hope that this answers your queries in full.”

Sanjay Shah in cross-examination tried a number of lines of argument as to why that response was not thoroughly and deliberately misleading. They were all, I regret to say, feeble attempts to defend the indefensible. He resorted instead to an attempt to distance himself from it, effectively claiming to have been merely a post-box passing messages between Ms Stratford, on the one hand, and Priyan Shah and Mr O’Callaghan, on the other, whom he wished to say held the drafting pen. That flew in the face of the documentary record and was in my judgment an example of Sanjay Shah saying whatever occurred to him to say in the moment, question by question, in the hope that something he said might be thought plausible.

On 23 June 2015, Ms Stratford passed to Sanjay Shah an enquiry from the FCA as to why the bulk of SCP’s revenue in 2014 was generated between April and September. She suggested “replying (along the lines of the response to LSE) that “activity is client driven and clients do not share their trading strategies with us therefore I cannot provide a particular reason why there was more activity in that period”; and Sanjay Shah approved: “i think thats fine. this year the clearing fees are a flat monthly rate so there should be no spikes”. Mr Shah knew that proposed response to be false. The trading strategy was Solo’s strategy, given to the clients and directed by Solo in its execution; and the spike in revenues for SCP will have arisen because its major revenue stream was Solo Model trading, on which its fees were charged trade by trade prior to 2015, and that was tailored around dividend declaration dates and the generation of tax refund claims the chronological pattern of which across the calendar year was not smooth. I do not consider this to be evidence that Mr Shah knew or believed that the Solo Model amounted to or involved a fraud upon SKAT, rather than at most further corroboration that Mr Shah wanted to keep the reality of the Solo Model under the radar for fear that the FCA would seek to put a stop to it as an unacceptable form of trading.

The LSE and FCA enquiries are indications, however, of how the scale on which the Solo Model came to operate in 2014 and the first half of 2015 was going to make it impossible to stay under the radar much longer; and indeed, the lack of practical constraint in the Solo Model by 2015, to which I referred in paragraph 210 above, did lead to its undoing, and in consequence to the undoing of the Maple Point and Klar Models when SKAT’s investigations caught up with what had been happening.

There was an initial attempt in June 2015, not wholly effective, to tip SKAT off to what was happening, initiated (at the time anonymously) by Mr Bains. That was followed by a more concrete, detailed and informative tip-off from HMRC in July 2015. In different ways, the sheer scale of the Solo Model operation, as it had become in 2015, triggered both calls to SKAT to look into what was going on. Mr Bains had come to the view by the end of 2014 that Sanjay Shah was out to “bleed dry an innocent Nordic country [viz., Denmark] next year”, and the magnitude of the Solo Model by then was a spur to Mr Bains’ attempt to tip SKAT off. I cannot make any full finding as to what sparked HMRC’s initial interest to investigate, but the terms in which it tipped SKAT off in late July and early August 2015 evidence that the scale of Solo’s operation, as it had become, must have been part of it.

The almost total lack of control within SKAT over what it was paying, or why, by way of WHT refunds, described below as part of considering whether on the evidence SKAT can say it was misled into making payments, makes it possible, I think, that if Solo Model and Maple Point Model operations between them had been kept within (proportionately) more modest bounds, they might not have been stopped at all. From the main Danish dividend season in the first half of each year, the Solo Model generated c.DKK490m in WHT reclaims in 2013, but that leapt to DKK2.25bn in 2014 (with almost DKK1bn from Maple Point running independently alongside), then DKK5.71bn in 2015 (plus DKK1.75bn from Maple Point). Whether Sanjay Shah and others were greedy fraudsters, as SKAT claimed, or just greedy opportunists who had alighted upon a way of making a fortune without having to commit the fraud that SKAT alleged, as it seems to me greed was their downfall.

SKAT’s investigations following the HMRC tip-off led to a decision in August 2015 to suspend all WHT reclaim payments and eventually to these proceedings and all the other litigation around the world, civil and criminal, by which the Kingdom of Denmark has sought to make a recovery against what was paid out and to punish those whom it considers to have taken dishonest advantage of those lax controls.