Billions in tax fraud: BGH confirms the criminality of cum-ex transactions

For years, bankers have cheated the German tax authorities into billions through tax fraud.

The BGH now makes it clear: The trickery was illegal, profits are being confiscated.

Karlsruhe - The highest German court ruled that "Cum-Ex" share transactions with losses in the billions are to be assessed as tax evasion for the German tax authorities. Actors are thus making themselves liable to prosecution. This not only corresponds to the sense of justice, but also results directly from the law, the Federal Court of Justice (BGH) decided on Thursday in Karlsruhe. The first supreme court judgment (Az. 1 StR 519/20) in a Cum-Ex case was eagerly awaited. It is now clear that the criminal investigation of the scandal can continue.

The judges rejected all revisions against the nationwide first criminal judgment in a cum-ex procedure.

It is now final.

In March 2020, the Bonn district court sentenced two ex-stock exchange traders from London for tax evasion or aiding and abetting to prison terms on probation.

The BGH also confirmed that one of the men had to pay back profits of 14 million euros and that the private bank MM Warburg involved in the scandal had to repay more than 176 million euros.

Cum-Ex Richter: "There is no tax gap here"

Cum-ex transactions are so named because large packets of shares with (“cum”) and without (“ex”) dividend entitlements were pushed back and forth in rapid succession around the cut-off date for the distribution. The deliberately opaque transactions by investors, stock market traders and banks had only one goal: to create as much confusion as possible among the tax authorities. With this trick, those involved could have capital gains tax refunded on a large scale, which was never paid. The profits have been split.

The actors had always said they had only used a tax loophole.

The BGH gave this a clear refusal: The law clearly showed that only a tax that was actually paid could be asserted against the tax authorities, said the presiding judge, Rolf Raum.

"There was no gap here." With Cum-Ex it was only about one thing: the "bare grip in the cash register, into which all taxpayers normally pay".

The BGH also ruled that the confiscation of the profits from the transactions negotiated here between 2007 and 2011 is not excluded due to the statute of limitations.

The legislature clarified this with a new passage in the criminal code introduced in December 2020.