In the multi-billion dollar cum-ex tax scandal, the Federal Court of Justice has for the first time determined the criminality of the business.
The judges on Wednesday upheld the conviction of two stock market traders who were sentenced to suspended sentences last year.
The state may also collect the profits that were drawn from the criminal acts, the judges made clear (Ref .: 1 StR 519/20).
Corinna Budras
Business correspondent in Berlin.
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In the first cum-ex criminal judgment, the Bonn Regional Court sentenced the two defendants Martin S. and Nicholas D. to suspended sentences in several cases for tax evasion or aiding and abetting tax evasion, S. is also to repay 14 million euros in income from the business. The Warburg bank was the only one of five financial institutions originally involved to pay 176 million euros. The criminal proceedings underlying the judgment were unusual in several ways. The two stock exchange traders from London confessed and had for the first time publicly presented in court how the complicated cum-ex deals work in practice. They assured that it had not occurred to them at the time that they were doing anything criminal.
The judgment of the Federal Court of Justice has a signal effect far beyond the individual case. It is the first supreme court judgment in the complex that is considered to be the largest tax scandal in the history of the Federal Republic. There are more criminal proceedings pending, and hundreds could be added: The prosecutors are investigating more than a thousand suspects.
The basis for the deals were transactions in shares that were traded around the dividend date of the respective company. In this context, professional investors were able to have the capital gains tax paid on the dividends reimbursed. A faulty design in the processing of such transactions meant that investors were able to have the tax that was paid only once refunded several times. The name of these transactions arose from the fact that the shares were traded with - ie "cum" - dividend entitlement as well as without - ie "ex".