Former Luxembourg Fund Manager Sentenced Over Cum-Ex Trades

Günter G., former managing director of the now-liquidated Sheridan funds operated by Bank J. Safra Sarasin, was found guilty by a court in Bonn, according to a report in the business newspaper Handelsblatt.

Overview

A former Luxembourg-based fund manager has been sentenced to nearly four years in prison by a German court for his role in the Cum-Ex tax fraud scandal, one of Europe’s largest financial crimes. The case marks another significant conviction in the ongoing crackdown on dividend arbitrage schemes that cost European governments billions in lost tax revenue. [linkedin.com]

Details of the Case

• The convicted individual was a former managing director of funds operated by Bank J. Safra Sarasin, which were later liquidated.
• He was found guilty of serious tax evasion linked to Cum-Ex transactions, which exploited loopholes in German tax law to claim multiple refunds on dividend taxes that were never paid. [globalinve…review.com]
• The sentence handed down by the German court is just under four years, reflecting the scale of the fraud and the individual’s role in orchestrating trades that generated illicit tax refunds. [linkedin.com]

What Are Cum-Ex Trades?

Cum-Ex transactions involve rapid trading of shares with (“cum”) and without (“ex”) dividend rights around dividend payment dates. This created confusion over share ownership, allowing multiple parties to claim tax refunds on a single dividend payment.
The scheme, which operated until 2012, is estimated to have cost European states up to €55 billion, making it the largest tax fraud in European history. [ibanet.org]

Luxembourg’s Role

Luxembourg has come under scrutiny for its role as a financial hub that facilitated Cum-Ex transactions. Investigations have revealed that Luxembourg’s tax architecture and secrecy laws made it easier for funds to engage in these schemes. Authorities have since tightened controls and rejected suspicious refund applications, but the scandal continues to reverberate across Europe. [luxtoday.lu]

Broader Implications

The sentencing underscores:

• Heightened enforcement against cross-border tax fraud.
• Increased accountability for fund managers and financial institutions involved in aggressive tax schemes.
• Ongoing efforts by German prosecutors, who are investigating over 1,800 suspects linked to Cum-Ex trades. [newsmax.com]

Further Reading

• https://www.luxtimes.lu/businessandfinance/former-luxembourg-fund-manager-jailed-for-tax-fraud-in-germany/102670481.html?utm_medium=Social&utm_source=LinkedIn#Echobox=1762363255-1
• https://www.ibanet.org/the-Cum-Ex-tax-scandal-a-fraud-on-the-investor