Gerhard Schick discusses the CumEx and CumCum share-trading scandals that cost German taxpayers billions of euros over the course of several decades and the failures in political and social institutions that allowed these scandals to persist for so long.
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In Germany, the CumEx and CumCum share-trading schemes have become synonymous with the largest tax swindle in the country’s history, costing German taxpayers billions of euros. They also reveal the flaws of Germany’s political and social institutions, often admired by progressives elsewhere, and how most regulators, academics, and the media allowed the swindles to persist for decades.
Understanding CumEx and CumCum
The terms CumEx and CumCum come from Latin, where cum means “with” and ex means “without.” The terms refer to shares traded with and without dividend rights: rights to the underlying company’s profit distribution. These terms describe the timing of stock transactions around the dividend record date, the last day a share can be bought with dividend entitlement.
In a typical CumEx transaction, a network of investors and banks would rapidly exchange stock ownership positions around the dividend record date. Through short sales and clever timing, they could create confusion over who owned the shares at the dividend record date. This confusion was deliberate. Germany levies a capital gains tax as a withholding tax. For private investors, the tax settles their tax liability for dividend payments. Institutional investors are exempt from this tax, as they already pay it through their corporate and other taxes. As such, the withholding tax is refunded to them. A CumEx transaction enabled at least two parties to claim a refund for the withheld capital gains tax even though only one party would have paid it. CumEx actors could thus pocket duplicate (or even triplicate) tax refunds from Germany’s treasury.
CumCum, sometimes called the “big brother” of CumEx, was a more straightforward dividend arbitrage strategy. Unlike CumEx, it did not involve multiple claims for the same tax payment. Instead, foreign investors not entitled to full German capital gains tax credits would lend or park their shares with a German entity (often a bank) just before the dividend was issued. The German interim owner would receive the dividend and claim a tax credit or refund that the foreign investor was not entitled to. After the payout, the shares would revert to the original foreign owner, and the tax benefit was shared between the parties.
What makes the CumEx/CumCum scandal so extraordinary is both the sums involved and the fact that it persisted for so long in a modern democratic state. The first known instances of CumEx-style deals predate 1992 and CumCum transactions have been used as far back as the 1980s. Authorities largely failed to notice these schemes and lost an estimated 10 billion euros in tax revenue to CumEx transactions before legislation addressed them in 2011. Authorities failed to curb CumCum until 2016, by which time dealers had siphoned away an estimated 28 billion euros in taxes through these types of trades. Despite government crackdowns, similar trades persist to this day. When one specific mode of the schemes is made impossible, creative traders find ways to tweak and continue the transactions under the radar.
The failures of government and civil society institutions that enabled the scandals
Many factors allowed the CumEx and CumCum trades to persist for so long, including Germany’s decentralized regulatory and legal framework, the involvement of public banks, and the lack of curiosity among the media and academia. Corporate influence taints the failures of all these institutions.
Decentralized tax enforcement
Part of the scandal’s longevity can be attributed to fragmented oversight in Germany’s federal system. Tax enforcement is largely handled at the state level. Decentralization allows local political connections to influence enforcement—sometimes with troubling results. In Hamburg, for example, officials initially declined to reclaim tens of millions of euros from Warburg Bank, a local institution involved in CumEx trades. This decision came shortly after private meetings between the bank’s co-owner and then-mayor Olaf Scholz in 2016. Although Scholz, who served as Germany’s chancellor from 2021-2025, denied influencing the outcome and claimed not to recall the content of those conversations, the sequence of events sparked lasting controversy. Only after federal pressure did Hamburg pursue repayment.
In another case, the city’s tax authority chose not to reclaim 275 million euros in CumCum-related losses from the partly state-owned HSH Nordbank. Such incidents underscore how regional officials—perhaps swayed by personal ties or a desire to shield local institutions—looked the other way as financial institutions duped the government out of hundreds of millions of euros. In this context, decentralized tax authorities proved especially vulnerable to lobbying and political influence, allowing the fraud to persist in some regions.
As with tax administration, legal prosecution is decentralized in Germany. What might be useful in many day-to-day investigations proves inefficient in the case of large, complex investigations like CumEx that require profound financial expertise and involve international cooperation. One of the most impactful figures in the legal fight was Anne Brorhilker, a public prosecutor in the German state of North-Rhine Westphalia. She spearheaded the largest investigation into CumEx and pursued hundreds of indictments, often against strong institutional resistance. Starting in 2013, she initially worked alone on cases that each involved hundreds of millions of euros in lost taxes and altogether over 1,800 suspects. Her work ultimately led to some of the earliest convictions of CumEx participants.
Brorhilker faced attempts to limit her task force’s independence and even efforts to reassign her. Only public protests by civil society organizations like my own, Finanzwende, and others were able to stop these moves. In 2024, Brorhilker left public service and joined Finanzwende, signaling both the constraints within the legal system and the ongoing need for civic engagement to push for a tougher stance against white-collar crime.
In other federal states, prosecutors either refused to investigate at all (Hamburg) or were extremely slow to do so (Baden-Württemberg and Bayern). In Hamburg and Baden-Württemberg, missing or slow investigations included into the public banks of these states, causing worries that the lack of prosecution could be a result of political intervention.
The role of public banks
Public-sector banks are often seen as a counterweight to private, profit-oriented banks. In Germany, the public banking sector comprises small local banks (“Sparkassen”) controlled mainly by local politicians. The public-banking sector also includes large banks with international activities that are owned and controlled by the Sparkassen and regional governments. Several of these large banks played a key role in the CumEx and CumCum scandals: Landesbanken HSH Nordbank, WestLB, and LBBW made hundreds of millions of euros at the expense of taxpayers. Recent reports also indicate the involvement of Dekabank, the public banking group’s investment fund vehicle. Landesbanken spread the schemes to several Sparkassen. To put it bluntly, several prominent institutions set up to serve the public good stole taxpayers’ money. Regional finance ministers knew of the Federal Ministry of Finance’s efforts to curb CumEx but did not stop the regional public banks on whose boards they sat from doing those trades. The fact that even publicly owned banks engaged in such practices raises questions about the effectiveness of governance structures and institutional accountability.
The role of public media
Media scrutiny was oddly muted in the early years, too. Despite the immense scale of the fraud, few journalists for either private or public outlets dug into the story, and coverage remained sporadic. This limited coverage was especially striking given Germany’s strong public broadcasting system, which is intended to ensure independent reporting on matters of public interest.
Coverage was not absent for want of evidence. Several major news outlets hesitated to publish exposés on the schemes. Most notably, Die Zeit, one of Germany’s most influential papers, did not begin to cover the scandal until 2017. An editor’s personal ties to a Warburg Bank owner reportedly led to delays in the investigation. Other investigative journalists who pursued the story faced legal threats from powerful suspects, creating a chilling effect.
Not until 2017–2018 did the scandal truly break into the mainstream press. A consortium of reporters—led by the non-profit newsroom Correctiv—sifted through leaked files and trading records to piece together what was happening. Their cross-border investigation, named the “CumEx-Files,” revealed that similar tax-rebate schemes had affected at least 11 European countries, with an estimated 55 billion euros siphoned away from public purses.
Academic engagement was minimal. While professor Christoph Spengel, a tax scholar, became an authoritative voice quantifying the financial damage of the trades once they became public, few others in academia addressed the issue. In fact, several law professors authored legal opinions defending CumEx trades—often commissioned and paid for by financial institutions under investigation. Some of these studies were even published without disclosing conflicts of interest. This lack of independent scrutiny is especially troubling in light of Germany’s publicly funded university system. The contradiction of taxpayer-funded institutions producing work that served private tax avoidance efforts highlights how financial incentives can compromise academic independence. By contrast, Spengel’s analyses reached wide audiences and supported reform efforts—particularly through his collaboration with journalists and his testimony before parliamentary committees.
Political pressure and lobbyism
Some lawmakers, including me, did begin to raise concerns even before the media finally started discussing the scandals. As a member of parliament for the Green Party, I submitted early parliamentary questions about CumEx in 2013. At the time, the issue was largely unknown outside financial circles. In 2016, lawmakers from the Greens and the Left Party, then both in opposition, succeeded in establishing a parliamentary inquiry committee—an unusual step given that the scandal had not yet reached the attention of the broader public. The committee’s final report helped uncover how institutional weaknesses and regulatory inaction allowed the fraud to persist for years. Whereas the governing majority claimed that public institutions had made no relevant mistakes—as one legal website pointed out, they had appointed the federal finance ministers who oversaw the banking industry during the period of the scandals—the opposition lawmakers provided detailed insights into bureaucratic inertia, political caution, and a lack of coordinated expertise that slowed the response. They highlighted especially the need to better protect whistleblowers and take advantage of their insights.
The inquiry also brought to light the impact of lobbying. The private banking association was able to have incorporated their proposal into a legal act designed to curb CumEx transactions that in reality catalyzed them by opening up loopholes. They were also able to organize internal resistance to increased regulation within the Finance Ministry. One senior official with close ties to—and in part paid by—banking lobbyists was found to have slowed down government responses to CumEx by sharing draft legislation and internal evaluations with private actors, thereby giving CumEx participants time to adjust their strategies. While the government decided not to prosecute the senior official, the case highlighted the gray areas of private lobbying and influence of government policymakers.
Still, the inquiry had tangible effects: it prompted the Finance Ministry to take action against ongoing CumCum transactions and address remaining regulatory shortcomings.
However, two federal notices sent to state finance ministries in 2016 and 2017 undermined enforcement. Though presented as legal guidance due to legal uncertainty, they led many tax offices to assume that reclaiming illegal refunds was not yet possible. Recovery efforts were effectively stalled for years. Only after a clarification in the summer of 2021 that explicitly allowed civil recovery without a prior criminal conviction could state authorities begin to actively retrieve the unlawful payouts.
Without public pressure from the media and other elements of civil society, Germany’s politicians dragged their feet to investigate the bankers, traders, tax consultants, and lawyers involved in the wrongdoing. I resigned from parliament in 2018 in order to launch Finanzwende to fight financial crimes and counterbalance corporate lobbying. Finanzwende became a central actor in keeping public and political attention on the CumEx/CumCum issue. We campaigned for stricter regulation, supported investigative efforts, and provided resources for journalists and policymakers. Finanzwende helped shape the public narrative around CumEx/CumCum as a matter not just of finance but of democratic accountability.
Lessons Learned
The CumEx/CumCum affair reveals how systemic blind spots in democratic oversight can persist for decades, even in a highly regulated and institutionally robust country like Germany. It was not the absence of laws that enabled the fraud, but the failure of institutions to act on early warning signs: tax agencies and legal prosecution fragmented by federalism, lack of control in the public banking sector, and a scholarly community that too often remained silent—or was even complicit.
Yet the scandal also demonstrates democracy’s potential for self-correction. Determined individuals across journalism, politics, law, and civil society broke the silence and forced action.
Author’s Disclosure: Gerhard Schick previously worked on the CumEx/CumCum scandals as a Member of the German Parliament. He is now part of the executive board of Finanzwende, an NGO committed to fighting financial crime and limiting financial lobbying. Finanzwende is financed mainly through membership fees and private donations, supplemented by foundation grants, but does not receive public funds. A full list of supporters is available on the organization’s transparency pages.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
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