Malaysia dismisses 1MDB charges against Goldman Sachs

September 4, 2020.

Malaysia officially dismissed criminal charges against related to the 1Malaysia Development Berhad scandal on Friday, completing the $3.9 billion settlement agreement between the country and the bank reached in July.

Charges of misleading investors against three units of Goldman Sachs — Goldman Sachs International, Goldman Sachs Asia and Goldman Sachs Singapore — were disposed by Judge Mohamed Zaini Bin Mazlan in Malaysia’s High Court. The investment bank units had pleaded not guilty in February.

The $3.9 billion settlement involved the New York-based investment bank acknowledging the misconduct of two former employees in the 1MDB corruption scheme, a $2.5 billion cash payment and the guarantee that at least $1.4 billion in assets seized by governments around the world will be returned to Malaysia.

Goldman Sachs subsequently lowered its second-quarter earnings by $2 billion because of increased provisions for litigation and regulatory proceedings. The agreement was signed last month.

Malaysian state investment fund 1MDB was originally set up in 2009 to finance economic deals in the country, but billions of dollars were stolen in a criminal conspiracy that involved bribery, money laundering and lavish spending. Malaysian financier Jho Low was accused of masterminding the looting of the fund, and the scandal resulted in the electoral defeat of former Prime Minister Najib Razak. 

Goldman Sachs helped 1MDB raise $6.5 billion in a series of bond issues in 2012 and 2013, with the investment bank earning $600 million in fees from the bond deals, according to the U.S. Department of Justice. The Malaysian government has said that Goldman Sachs knew when selling the bonds that the funds would be misused.

Malaysia has recovered more than $4.5 billion of the funds lost in the 1MDB scheme.

Earlier this week, the U.S. said it will recover more than $60 million in assets related to the 1MDB scheme from Hollywood producer Riza Aziz, the stepson of Razak. Aziz used money embezzled from the scandal-ridden fund and laundered through financial institutions in the U.S., Switzerland, Singapore and Luxembourg to buy assets such as luxury real estate, fine art and film memorabilia.

--Additional reporting by Allie Ciaramella