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

In this section of this Appendix, ‘Mr Shah’ will always be Sanjay Shah. He was the driving force behind Solo Model trading and the massive business it became, particularly in 2014/2015. He founded and was the ultimate beneficial owner of the Solo and Elysium Groups. He devised the idea of using internalised settlement to avoid the need for shares or external funding. He recruited (directly or indirectly via others) the large majority of the principals behind Solo Model USPFs and LabCos, short sellers, stock lenders and (for 2014/2015) forward counterparties. Of course assisted by others, particularly the DWF Ds until they left Solo, Priyan Shah and Mr O’Callaghan thereafter, Sanjay Shah’s principal activity during 2012-2015, other than the management of the great wealth he was acquiring from it, was the Solo Model trading and the sharing of the huge profits generated by it.

It was common ground that Mr Shah was aware at all times that the Solo Model custodians never held any shares with VP Securities, directly or indirectly via any sub-custodian, for themselves or their clients. That is to say, he knew there was never any chain of custody, and that means there were no shareholdings. In cross-examination, Mr Shah sought to defend himself on this point by proposing that shares only exist as book entries, and therefore a book entry made by a Solo Model custodian was, or could have been, a share. That is obviously fallacious. A share is what it always has been. Fungibility and dematerialisation mean that a custody chain of share ownership records now functions, in effect, as the ultimate complete share register identifying who owns shares. So there is a sense in which it is perhaps true to say that nowadays an account record of a certain kind will be the only record a shareholder normally has of their shareholding. But that is very different to Mr Shah’s proposition that a custodian does, or can, create shares simply by making a book entry that purports to record that they are holding shares for a client. Nor, for completeness, was there any basis in the expert evidence for supposing there was ever any market (mis-)understanding that a custodian not holding shares could somehow create shares by such a book entry. The market practice experts were agreed that no such concept was known.

When asked to clarify what exactly he was saying he thought at the time a Danish share was, Mr Shah was unable to offer anything coherent:

“Well, yes, a share was a -- I suppose I would call it an abstract asset. It is dematerialised and it can only be represented in the books and records of a custodian. It is the custodian’s obligation to make sure their own books and records balance. So for every positive account holding there has to be a negative account holding somewhere, and that is where the short seller’s position comes in.”