Shah, 53, stands accused of being the mastermind behind fraudulently securing dividend tax refunds from the Danish treasury via trading schemes, known as 'cum-ex', between 2012 and 2015. He pleaded not guilty when the trail began last week in a court outside Copenhagen.
The scheme involved trading shares rapidly between banks, investors and hedge funds around dividend payout day, creating an illusion of numerous owners, each seemingly eligible for tax refunds on dividends. Denmark estimates it lost 12.7 billion Danish crowns ($1.9 billion) in total.
Such schemes are estimated to have stripped state coffers in European countries, including Germany, Austria and Belgium, of billions of euros.
Shah outlined how his London-based hedge fund Solo Capital Partners directed a closed "spiderweb" of trades.
"This involves taking advantage of a legal loophole that arose when shares were no longer physical shares," Shah told the court.
According to Shah, this loophole allowed participants to claim ownership of shares, thus being entitled to tax refunds, even if they did not own the shares and never paid any dividend tax in Denmark.
He detailed how Solo Capital advised clients in the United States and Malaysia, many of which were founded or controlled by his own company, about the volume and timing of their trades.
Shah said all participants in the orchestrated trading activity followed the same pattern and trading concurrently.
"It was like a ballet," Shah said.
He said he was advised by tax specialists at Solo Capital, who gained their insights from Danish attorneys and public information.
"I'm not a tax expert," he told the court. During his testimony, he repeatedly claimed memory lapses when questioned by the prosecutor.
Shah was arrested in 2022 in Dubai, where he resided on a private island in the Palm Jumeirah development, known for his opulent lifestyle and hosting celebrities like Snoop Dogg, Elton John, and Ed Sheeran.
In December last year, he was extradited to Denmark. Prosecutor Marie Tullin asked the court to confiscate assets belonging to Shah worth 7.2 billion Danish crowns, including a list of 21 properties, mostly in the UK.
Tullin, who finished her questioning of Shah on Thursday, alleges that Shah and other actors in the cum-ex scheme misled the state through fictitious trades.
The Copenhagen trial has 58 court hearings scheduled until June 2025. Shah is charged under an article in the Danish criminal act that could carry up to 12 years in prison.
The Danish tax agency is set to begin a civil lawsuit against Shah in London on April 14, where it expects to recover between 8.5 billion and 9.5 billion crowns.
Last month, a Danish court sentenced Britons Anthony Mark Patterson and Guenther Klar to eight and six years in prison, respectively, for their involvement in Shah's trading scheme.
Shah explained the scheme to the lay judges in court that it was comparable to baking a cake.
"If you want to bake a Black Forest Cake, you have to follow the recipe. If you leave out the butter, you won't end up with a Black Forest Cake," Shah said.
