The network stole several billion Euros from the treasury, through what
Correctiv calls a "cum-ex" trade: The participants in the network would lend each other shares in large companies, so that to tax authorities there would appear to be two owners of the shares, when there was only one. The bank that was used in stock trading would then issue a "confirmation" to the investor that tax on the dividend payment had been paid, without it being done. "It's a bit like parents claiming a child benefit for two – or more – children when there is only one child in the family." writes Correctiv. In cum-ex trades, shares with and without dividend rights were quickly traded between various market participants just before the payout date for the dividend, allowing traders to reclaim double the taxes. Financial institutions in essence allowed two parties to simultaneously claim ownership of the same shares, therefore allowing both to claim tax rebates to which they were not entitled. Authorities have since deemed the reclaims illegitimate, but at the time of the trades, this was less black and white, and a vast network of traders, analysts and lawyers were thought to be involved in the practice throughout the continent. The prestigious law firm
Freshfields Bruckhaus Deringer gave tax advice which was used to justify the legality of the scheme. In November 2019, Ulf Johannemann, a former Freshfield partner who was head of the international tax department, was arrested. In January 2024 Ulf Johannemann was found guilty of aiding and abetting a multiyear dividend tax fraud and sentenced to three years and six months in jail in a landmark ruling by a Frankfurt court. In May 2020, the
European Banking Authority announced a 10-point action plan to enhance the future regulatory framework surrounding dividend
arbitrage trading schemes. According to the report, in some countries, the cum ex deals are not criminal offenses. ==Danish dividend scandal==