Judgment of the Federal Court of Justice: Cum-ex transactions are punishable by law


Status: 07/28/2021 12:06 p.m.

The business in the multi-billion dollar cum-ex tax scandal is illegal. The Federal Court of Justice confirmed this for the first time in a landmark ruling. It is a criminal tax evasion, ruled the judges.

The cum-ex deals, in which banks and investors have cheated the state out of billions, are punishable by law. The Federal Court of Justice (BGH) confirmed this for the first time in a landmark judgment. Two British stock traders were convicted of tax evasion and aiding and abetting tax evasion.

“BGH ruled that cum-ex transactions are a criminal tax evasion”, Kolja Schwartz, SWR

daily news 12:00 p.m., 7/28/2021

The defense lawyers had argued that the dealings were not punishable because of a loophole in the law. However, the BGH contradicted this view. The defendants acted willfully and only conducted the business in order to induce the tax authorities to issue tax refunds. It was a matter of willful tax evasion.

The Senate rejected the argument that there was a loophole in the law. “There was no gap here,” said the presiding judge, Rolf Raum.

Banks cheated the tax authorities for billions of euros

Investors, banks and stock traders had cheated the German tax authorities by billions of euros for years with cum-ex deals. Shares with (“cum”) and without (“ex”) dividend entitlements were shifted back and forth around the reference date. For these transactions, the parties involved had capital gains tax reimbursed, which they had never paid.

In addition to the condemnation of the British stock traders, the judges also confirmed that the private bank MM Warburg involved in the scandal had to pay 176 million euros to the state treasury.

Judgment points the way for further proceedings

With the BGH ruling, it is now finally clear that not only a tax loophole was used here. In March 2020, the Bonn Regional Court sentenced the British to suspended sentences for tax evasion or aiding and abetting.

In addition, the BGH ruling is trend-setting because numerous criminal proceedings are still pending before German courts in the Cum-Ex complex. All in all, it is about billions of dollars.


(Ref. 1 Str 519/20)



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