Cracking tale from @DonalGriffin1 & co: The move against Duet highlights how a dragnet is now being drawn through the entire Cum-Ex industry, following executives around almost a decade after the end of the controversial trading strategy
Some days he wouldn’t set foot at all inside the office on the fourth floor of Al Fattan Tower in Dubai’s financial center, according to former colleagues who asked not to be identified discussing corporate life. But for a few weeks each spring, when European companies dole out dividends, the trader -- whom Bloomberg is choosing to call A. for legal reasons -- would log long days at his desk and generate huge profits for his firm.
Those deals have come back to haunt Duet, after A. turned from a star performer to a star witness for German prosecutors. A.’s story reveals the far-reaching net that continues to entangle individuals and firms who were engaged in so-called Cum-Ex transactions, almost a decade after the dividend-tax practice ended. London-based Duet at its peak had several billion dollars under management and allegedly played a key role in arranging the deals.
A., who left the firm in 2015, is one of the first traders to cooperate with an investigation into what German lawmakers say is one of the biggest tax heists in European history. He joins a handful of finance industry figures who did Cum-Ex trades at other firms and have provided testimony about former employers, colleagues and counterparties -- cooperation that has helped some of them stay out of jail.
This story is based on London court filings and an indictment against two bankers -- convicted last year -- assembled by German authorities, as well as conversations with more than a dozen people involved in the probe and familiar with Duet’s operations. They asked not to be identified because details of the case remain confidential.
Police briefly apprehended Duet co-founder Henry Gabay last year in connection with an extradition hearing. Gabay denies any wrongdoing. At least three other people with ties to Duet have faced scrutiny from the authorities. One Duet employee -- who works in operations -- lost a ruling this month challenging a German extradition request, after A.’s testimony resulted in a warrant.
Last month, Danish prosecutors charged Shah and another Briton for their alleged roles in a 9.6 billion-krone ($1.6 billion) tax-fraud probe. He maintains that what he did was legal and denies any wrongdoing.
A. had never heard of Gabay’s firm when he was first approached by a headhunter about the role -- but one thing he was intimately familiar with was tax.
A qualified chartered accountant, he had worked on “tax-optimizing” ideas in the mid-2000s while at JPMorgan Chase & Co. in London. A. told prosecutors that he helped develop a Cum-Ex structure for the U.S. bank in 2008, only for the firm to abort the practice a year later because of a change in regulation, according to the indictment in the German case.