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

Between May 2014 and February 2016, funds totalling c.€46.8m were paid from accounts at SCP to fund the acquisition of c.80% of Varengold Bank AG, a German bank. Individual share acquisitions were coordinated by or on the instructions of Sanjay Shah, and on 26 August 2015 he was elected, together with Mr Barac and Mr Murphy, to the Supervisory Board of Varengold Bank. The various acquisitions were as follows:

Those Varengold Bank shareholders, except AESA and Elysium Dubai which were under Sanjay Shah’s control anyway, held their shares de facto as nominees for Sanjay Shah. Their acquisition of Varengold Bank shares was funded indirectly by him so he would obtain covertly, as thus he did, effective control of Varengold Bank, when an overt attempt would have failed because it would have required a regulatory approval that Sanjay Shah did not have and did not want to take the time to seek. This was disputed by the trial defendants in question, save for Mr Patterson and (effectively) Mr Preston (see below); but in my judgment it was comfortably demonstrated by the evidence, and the relevant defendants’ denials were not credible.

Several funding mechanisms were used for the Varengold Bank share acquisitions. The primary technique was the use of sham “High-Low Trades” in June 2014. Purported trades to buy and sell German shares, matching except as to price, were documented with Ganymede through Bastion, one of the brokers that participated in Solo Model trading, at prices chosen so that Ganymede would appear to have made an intra-day trading loss as the supposed commercial basis for transfers of sums totalling €23.7m from Ganymede’s account at SCP to fund the acquisition of Varengold Bank shares.

Some of the Varengold Bank share purchases were funded through loans and counter-loans between the purchasers and Elysium Dubai. For example, in relation to Mr Preston, on 18 January 2015 Elysium Dubai and Skyfall Holdings, the parent company of Skyfall, Mr Preston’s Varengold Bank buyer, entered into: (a) a loan facility for Elysium Dubai to lend Skyfall Holdings €5.31m; (b) a loan facility for Skyfall Holdings to lend Elysium Dubai €1.77m. The net effect was a loan of €3.54m from Elysium Dubai to Skyfall Holdings.

In other cases, funding was provided by Sanjay Shah’s companies ostensibly pursuant to invoices raised for purported consultancy services provided.

Whatever funding mechanism was used, the majority of the ultimate indirect owners of the Varengold Bank shares provided or were intended to provide security for the funding. Some arranged for a charge over the shares in the Varengold Bank share purchaser, or an entity with effective control of that purchaser, in favour of a Sanjay Shah entity. Others granted a Sanjay Shah entity an option to purchase the Varengold Bank shares.

Sanjay Shah accepted that he had the money to acquire all the shares in Varengold Bank and that his goal was to achieve sole ownership. He said that he believed an acquisition of Varengold Bank by him, or by a company of his, would “engage various regulatory rules which would be time consuming to resolve”. He claimed to have assembled the principals behind the other acquirers, therefore, to be “shareholders in their own right” as part of an “investment club”. This might have made sense if any of these ‘investment club’ members were co-investing with Sanjay Shah, but it was not a credible explanation for his funding of their investment on terms that entitled him to any upside. The transparent reality, confirmed by contemporaneous evidence, is that Sanjay Shah was using the other individuals, with their consent, to disguise his effective indirect acquisition of a controlling stake in the bank.

Mr Patterson admitted in his Defence that his companies’ Varengold Bank shares were held as nominee for Sanjay Shah. In October 2014, Mr Bains confirmed in a note to his new employer, Arunvill, that he and all the others held their Varengold Bank shares as nominees for Sanjay Shah. His denial of nomineeship in his Defence was fatally undermined by that. The cross-examination of Mr Bains on this aspect demonstrated, in my judgment, that the account in his note for Arunvill was substantially accurate. The further detail emerged that, at the time, Mr Bains intended not to honour the arrangement with Sanjay Shah, or at least to threaten not to do so, so that he would either sell his Varengold Bank shares, or force Mr Shah to buy him out, as a self-help means of enforcing what he (Mr Bains) believed to be bonus entitlements that Mr Shah had not honoured. That proved successful, as Mr Shah arranged for and funded Mr Barac to buy Mr Bains out.

Mr Preston’s Defence also denied that he was Sanjay Shah’s nominee but in his evidence he admitted, in substance, that he was, even if he did not use that label. His evidence was that it was agreed from the outset that he would “hand the shares back to Sanjay Shah in the future”, that they “were always going to be returned to Sanjay Shah”, and that at all times he took direction from Sanjay Shah in relation to the shares.

Other trial defendants who were Varengold Bank ‘investors’, for example Mr Jain and Mr Smith, clung in their evidence to a story that they were investing for their own account, not on behalf of Sanjay Shah. In my judgment, they did so as a dishonest response to SKAT’s allegation that participation in the Varengold Bank acquisition evidenced knowledge or understanding that the GSS cum-ex trading business involved, and was designed to generate, deceit practised upon SKAT. I do not accept that allegation. It did the defendants in question no credit that they did not tell the truth about the Varengold Bank arrangement, and trust the court with any decision over whether that took SKAT anywhere on the claims made in these proceedings. As juries are rightly and routinely directed, defendants may lie for any number of reasons other than that the material allegations against them in the case are true and they have no answer to them. In my view, that was the position here in relation to the Varengold Bank business.

To be clear, I am not considering whether the true arrangement, informal and undocumented as it was, that the Varengold Bank shareholders funded by Sanjay Shah would act as his nominees so that he had effective control over Varengold Bank, would have been legally enforceable, even apart from any impact of their purpose of circumventing regulatory takeover requirements, and I am not in a position to make, nor do I need to make, any definite finding as to whether those requirements were breached. My finding is only of the understanding, informal but accepted at the time, between Mr Shah and all of those shareholders (through their respective principals).

After 2015, Mr Patterson, Ms Bhudia, Mr Smith, and Mr Preston transferred the shares in their Varengold Bank vehicles, or parent companies, to entities controlled by Sanjay Shah. Mr Jain, and also former defendants Messrs Barac, Lui, Priyan Shah and O’Callaghan, resisted subsequent attempts by Sanjay Shah to obtain ‘their’ Varengold Bank shares. They were identified in an October 2016 note by Greg Nixon, a lawyer at Elysium Dubai, as “hostile” shareholders, apart from Mr Jain whom he identified as “non-hostile”, meaning that at that time Mr Jain was not yet pretending that he did not hold his Varengold Bank shares for the benefit of Sanjay Shah. The later refusals to transfer Varengold Bank shares to Sanjay Shah, or to his order, does not disprove that they were supposed to be being held as nominees for him. By that time, Solo had been the subject of publicly reported raids, and those “hostile” shareholders may well have considered that it was not in their interests to admit involvement in what had been a dishonest scheme by which Sanjay Shah took effective control of Varengold Bank.

The funding of the Varengold Bank share acquisitions by the companies of Mr Lui, Mr Jain, Mr Barac and Messrs Priyan Shah and O’Callaghan was never repaid, and their shares were later transferred to SKAT pursuant to proceedings brought in Germany by a prosecution authority in the context of an investigation into the Varengold Bank acquisition as possible money laundering.