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It May Be the Biggest Tax Heist Ever. And Europe Wants Justice

25 points by cs702 7y ago

LorenPechtel 7y ago
They passed ineffective laws against it. To me that strongly suggests it actually was legal even thought the state didn't want it to be.
- eutropia 7y ago
  This sort of reasoning is why we have judges, though. If the law isn't capable of preventing something that requires a rube-goldberg machine of trades and positions, then a judge using common sense ought to be able. It's pretty clear that one tax refund should be claimed one time, and suggesting the contrary (that claiming it twice is OK, e.g. that cum-ex is fine) is mental gymnastics to justify fraud/theft. If someone is ok with stealing from the government (aka, your fellow taxpayers) then they should be willing to accept the consequences of being caught.
  - guitarbill 7y ago
    Totally agree. It's useful to bear in mind European legal systems are different, and more spirit of the law. It's hard to imagine these highly knowledgable people didn't know what they were doing, and the trial will try to show this. German culture also doesn't encourage or reward rule breaking. Famously, you don't jaywalk. (There are downsides to this, see Tesla vs German car industry.) This doesn't bode well for anybody involved with Cum-Ex deals.
  - lacker 7y ago
    A principle like “one tax refund should be claimed one time” is not clear at all. There are hundreds of different rules for getting refunds on your taxes and many of them can be used multiple times.
  - jki275 7y ago
    Judges are supposed to follow the law. What you are describing is judicial activism, which is not the function of the judiciary. The laws should be written correctly, if they are not they need to be fixed -- not enforced differently by judicial fiat.
  - LorenPechtel 7y ago
    A judge is capable of saying the law is improper, you're not guilty, but a judge isn't capable of criminalizing conduct which the law doesn't make criminal, no matter how obvious it is that they did something wrong. For example, a drug dealer who walked because the state law misspelled the drug. A one character error but it was a perfectly valid chemical name, just not the one they intended to make illegal.
SamReidHughes 7y ago
What was the actual mechanism they exploited that made them think or pretend to think that this was legal? There is some explanation in the Wikipedia article but it doesn't describe how the refund was untied from, say, actually receiving a dividend, or the payment of some tax that would get refunded. https://en.m.wikipedia.org/wiki/CumEx-Files https://en.m.wikipedia.org/wiki/CumEx-Files
- itcrowd 7y ago
  As I understand it, it "wasn't considered illegal" and for some shady minds that means it is legal, even if highly dubious or morally wrong. The mechanism that made it possible was outlawed at some point, I think 2011, but the fraud continued. There is a simplified explanation of the mechanism here [1], from which the following is taken: > Simplified, cum-ex trading works something like this: > Party One [..] "lends" its stock to Party Two, a bank. Under the agreement, the title and ownership of the stock is temporarily transferred to the borrower in return for a fee. [..] > Party Two then sells the shares with-dividend to Party Three fractionally before the Record Date [i.e. dividend soon-to-be-payed]. However, the shares are delivered without-dividend just after. > Like a magic trick, the shares "disappear" fractionally before the Record Date and "reappear" with a new owner just after. The aim is to obscure exactly who – Party One, Two or Three – owns the stock on the Record Date. As a result, two parties can simultaneously claim ownership of the one stock. > Up until 2011, a loophole in the German tax code allowed both Party One and Party Three [..] to claim a tax reimbursement. All colluding parties would then split the gains. [1] https://theconversation.com/the-robbery-of-the-century-the-cum-ex-trading-scandal-and-why-it-matters-124417 https://theconversation.com/the-robbery-of-the-century-the-c...
  - ChainOfFools 7y ago
    > As a result, two parties can simultaneously claim ownership of the one stock. interesting, a very special case of double-spending attack, but on a security? was this kind of thing much more commonplace before electronic trading systems came about
  - jki275 7y ago
jaytaylor 7y ago
Paywall bypass: http://archive.is/8J8tC http://archive.is/8J8tC

25 points by cs702 7y ago

They passed ineffective laws against it. To me that strongly suggests it actually was legal even thought the state didn't want it to be.

eutropia 7y ago
This sort of reasoning is why we have judges, though. If the law isn't capable of preventing something that requires a rube-goldberg machine of trades and positions, then a judge using common sense ought to be able. It's pretty clear that one tax refund should be claimed one time, and suggesting the contrary (that claiming it twice is OK, e.g. that cum-ex is fine) is mental gymnastics to justify fraud/theft. If someone is ok with stealing from the government (aka, your fellow taxpayers) then they should be willing to accept the consequences of being caught.
- guitarbill 7y ago
  Totally agree. It's useful to bear in mind European legal systems are different, and more spirit of the law. It's hard to imagine these highly knowledgable people didn't know what they were doing, and the trial will try to show this. German culture also doesn't encourage or reward rule breaking. Famously, you don't jaywalk. (There are downsides to this, see Tesla vs German car industry.) This doesn't bode well for anybody involved with Cum-Ex deals.
- lacker 7y ago
  A principle like “one tax refund should be claimed one time” is not clear at all. There are hundreds of different rules for getting refunds on your taxes and many of them can be used multiple times.
- jki275 7y ago
  Judges are supposed to follow the law. What you are describing is judicial activism, which is not the function of the judiciary. The laws should be written correctly, if they are not they need to be fixed -- not enforced differently by judicial fiat.
- LorenPechtel 7y ago
  A judge is capable of saying the law is improper, you're not guilty, but a judge isn't capable of criminalizing conduct which the law doesn't make criminal, no matter how obvious it is that they did something wrong. For example, a drug dealer who walked because the state law misspelled the drug. A one character error but it was a perfectly valid chemical name, just not the one they intended to make illegal.

SamReidHughes 7y ago

What was the actual mechanism they exploited that made them think or pretend to think that this was legal? There is some explanation in the Wikipedia article but it doesn't describe how the refund was untied from, say, actually receiving a dividend, or the payment of some tax that would get refunded. https://en.m.wikipedia.org/wiki/CumEx-Files https://en.m.wikipedia.org/wiki/CumEx-Files

itcrowd 7y ago
As I understand it, it "wasn't considered illegal" and for some shady minds that means it is legal, even if highly dubious or morally wrong. The mechanism that made it possible was outlawed at some point, I think 2011, but the fraud continued. There is a simplified explanation of the mechanism here [1], from which the following is taken: > Simplified, cum-ex trading works something like this: > Party One [..] "lends" its stock to Party Two, a bank. Under the agreement, the title and ownership of the stock is temporarily transferred to the borrower in return for a fee. [..] > Party Two then sells the shares with-dividend to Party Three fractionally before the Record Date [i.e. dividend soon-to-be-payed]. However, the shares are delivered without-dividend just after. > Like a magic trick, the shares "disappear" fractionally before the Record Date and "reappear" with a new owner just after. The aim is to obscure exactly who – Party One, Two or Three – owns the stock on the Record Date. As a result, two parties can simultaneously claim ownership of the one stock. > Up until 2011, a loophole in the German tax code allowed both Party One and Party Three [..] to claim a tax reimbursement. All colluding parties would then split the gains. [1] https://theconversation.com/the-robbery-of-the-century-the-cum-ex-trading-scandal-and-why-it-matters-124417 https://theconversation.com/the-robbery-of-the-century-the-c...
- ChainOfFools 7y ago
  > As a result, two parties can simultaneously claim ownership of the one stock. interesting, a very special case of double-spending attack, but on a security? was this kind of thing much more commonplace before electronic trading systems came about
- jki275 7y ago

jaytaylor 7y ago

Paywall bypass: http://archive.is/8J8tC http://archive.is/8J8tC