New Libor tax scandal

City lawyers predict that it will not be long before London is hit by the aftershocks of an alleged tax evasion scheme that is understood to have cost European treasuries €55 billion.

Martin Shields and Nicholas Diable, two British investment bankers, are on trial in Germany accused of helping to facilitate the so-called cum-ex trading scheme, which exploited a tax loophole until it was closed in 2012.

"This has already been likened to the next Libor scandal,” says Bambos Tsiattalou, founding Partner at specialist criminal and civil litigation firm Stokoe Partnership Solicitors (
www.stokoepartnership.com).

“If the SFO wants to sink its teeth into this then it must surely keep in mind that only five convictions in relation to its Libor investigation were eventually secured.”

Cum-ex trades were once relatively common.  Their unusual name derives from the Latin words for “with” and “without”.  In simple terms, these trades involve the rapid lending of shares as dividends fall due, so as to enable two parties to simultaneously claim ownership of the same shares.  Participants could exploit loopholes in tax legislation allowing both parties to claim valuable tax rebates.

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