The cum-ex scandal has rocked Germany. The trial at the heart of the matter was expedited due to the coronavirus outbreak. Brandenburg Gate, Berlin. Credit: Michele Tantussi/Bloomberg

A German court has handed two British traders suspended sentences, in a first-of-its kind judgment that followed the criminal case at the centre of the major cum-ex fraud scandal.

The case goes to the heart of the ongoing cum-ex scandal, in which high profile banks were found to have claimed twice on tax rebates, costing Germany several billions.

The court previously stated that the tax evasion scheme was not permitted under German tax law, but it had not ruled on the question of whether it was a criminal matter. Yesterday's ruling, however, delivers a decisive blow to the defendants in the case.

Bonn district court handed the two traders suspended sentences of 22 months and 12 months. It also ordered one of the traders to repay €14 million of the money he made from the trades in question. Meanwhile, the private bank M. M. Warburg & Co was told to repay €176.5 million.

The ruling sets a foundation for a number of pending trials in which Germany will attempt to  recover millions of euros from banks and investors.

Warburg said in a statement that it is probing all legal remedies in this matter. An appeal of the ruling to the German Federal High Court is possible.

On Tuesday, the court said it would truncate the trail in view of the coronavirus outbreak that has rocked the world.

Travel bans associated with the spread of the virus would have made the continuing participation of the two British defendants in the trial difficult and might have stretched the trial by a number of weeks, a spokesman for the court told Law.com International.

In September, the two London-based bankers, known Martin S and Nicholas D, stood before the  court charged with spearheading the transactions between 2006 to 2011. The trial was the first in a wider investigation that seeks to recover billions of euros from banks that took part in so-called cum-ex schemes, whereby banks claimed twice on tax rebates. Germany has said the schemes have cost its taxpayers €5 billion.

The scandal has since plunged a number of major law firms into suspicion of misconduct and,  worse, criminal wrongdoing, including Freshfields Bruckhaus Deringer, whose global head of tax, Ulf Johannemann, was  arrested in November.

Earlier this month, Clifford Chance's Frankfurt office was  raided  by German authorities seeking files on a banking client caught up in the saga, while in December, co-managing partner of DLA Piper Germany  stepped down amid revelations of his potential ties to the matter.

Read more: 

German Court Fast-Tracks Cum-Ex Trial Owing to Virus Outbreak

Freshfields 'Cum-Ex' Scandal Partner Arrested