(Bloomberg) -- The raid into the London offices of ED&F Man Capital Markets Ltd., carried out on behalf of Danish and German authorities as part of their sprawling Cum-Ex trading probe in 2022, was lawful, UK judges ruled.

“There were very grave suspicions about the past conduct of ED&F,” Judge Philippa Whipple said in the decision Wednesday. “It is naive to suggest that production orders might have been effective and sufficient in the circumstances.”

The subsidiary of the global commodities broker ED&F Man Holdings, which was fined £17.2 million ($21.4 million) by the UK’s Financial Conduct Authority in 2023 over its role in the Cum-Ex transactions, had challenged the search warrants and raids and sought the return of seized material.

Lawyers for ED&F Man argued that the company had already cooperated extensively with the FCA and that the named suspects no longer worked for ED&F Man at the time of the raids, making the search warrants “disproportionate and unnecessary”, according to the judgment.

However, the judge said that given the “scale and nature” of the fraud, “it was an obvious possibility” that ED&F Man might still employ people who were involved with “an interest in concealing documents relevant to the criminal investigations”. 

ED&F’s lawyers declined to comment on the ruling.

Cum-Ex took advantage of tax laws that seemed to allow multiple investors to claim refunds of a tax that was paid only once. Germany abolished the practice in 2012. Some traders then targeted Denmark in similar trades and the country has said it suffered a loss of more than $2 billion. The FCA said in a statement last year that ED&F had “enabled” significant volumes of dividend arbitrage trading that allowed millions of euros to be illegitimately claimed from Danish tax authorities.

The fraud trial of British trader Sanjay Shah, accused of being the mastermind behind the Danish trading scheme, began earlier this week. 


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