US Pension Plans Lose Bid to Halt Cum-Ex Tax Fraud Case Pursued by Denmark

A New York district court judge has allowed Denmark's tax agency to proceed with a "cum-ex" tax fraud case against a group of U.S. pension plans. The Danish tax agency had filed civil lawsuits in 2018, accusing over 100 retirement and pension plans of inflating Danish stock holdings to claim higher tax refunds.

The "cum-ex" schemes, prevalent since the 2008 financial crisis, exploited tax systems in countries like Denmark, Germany, and Belgium by rapidly trading shares within a syndicate of banks, investors, and hedge funds.

In a bellwether trial in the New York court, the judge rejected arguments from seven defendants, paving the way for the Danish tax authority to pursue its case. ED&F Man Capital Markets, a brokerage fined by Britain's markets regulator in June over the cum-ex tax scandal, is implicated, providing services to U.S.-based pension plans.

The Solo group, including five U.S.-based pension plans, a lawyer, two trusts, and their trustees, constitutes the second bellwether defendant group. The Danish tax agency alleges that British hedge fund trader Sanjay Shah orchestrated a fraudulent scheme involving wrongful applications for dividend tax refunds from 2012 to 2015.

Recent developments include the UK Supreme Court dismissing Shah's attempt to block Denmark's pursuit in a £12.7 billion London civil case. Denmark's supreme court also ruled that Bech-Bruun, a major law firm, must pay 400 million crowns for its involvement with a German bank linked to cum-ex schemes.

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