A British hedge fund trader has received a 12-year prison sentence from a Danish court after being convicted of defrauding the state out of £1 billion in a sophisticated tax fraud scheme.

Sanjay Shah, aged 54, was identified as the mastermind behind a complex trading operation known as ‘cum-ex,’ which illicitly acquired 9 billion Danish kroner through phony dividend tax refund applications between the years 2012 and 2015.

In addition, he was convicted of attempting to defraud the state of an extra DKK 553 million (£61.3 million). The court also mandated the seizure of DKK 7.2 billion from Shah.

Shah, who was extradited from Dubai last year, appeared at the court in Glostrup, a suburb of Copenhagen, donning a Christmas elf hat. He denied any misconduct, claiming he merely exploited a legal loophole that rendered his trades lawful.

Prosecutors pursued the maximum sentence of 12 years, which represents the longest prison term for economic crimes in Denmark. Shah’s legal counsel announced intentions to appeal the decision.

The fraudulent activities, directed by Shah’s investment firm Solo Capital Partners based in London, involved rapid trading of shares around the time of dividend payouts, creating a façade of multiple ownerships that appeared eligible for tax refunds, according to prosecution sources.

In court, Shah stated that the trading facilitated participants in claiming share ownership, thus becoming entitled to tax refunds without ever owning the shares or paying dividend taxes in Denmark.

The term ‘cum-ex’ refers to the acquisition of an equity position ‘cum’ (with) dividends in a jurisdiction that offers favorable tax conditions. Once the dividend is paid, shares are then returned ‘ex’ (without) dividends to their original jurisdiction.

These types of schemes are believed to have cost several European nations—including Germany, Austria, Italy, France, and Belgium—billions in lost public revenue.

Shah and his firm Solo Capital Partners are currently facing a civil lawsuit in the UK initiated by Denmark’s tax authority, seeking to reclaim £1.4 billion in refunds.

Investigative efforts spearheaded by Germany and Denmark have led to raids on banks, multiple arrests, and several prosecutions. Denmark has charged multiple British and American nationals involved in these fraud schemes.

In Germany, hundreds of individuals are under investigation for similar cases, with several lawyers, bankers, and asset managers already sentenced to prison.