Malaysia files criminal charges against Goldman Sachs and two ex bankers, saying it seeks fines ‘well in excess’ of $2.7 billion

Malaysia filed criminal charges against Goldman Sachs and two of its executives for “grave violations of our securities laws” relating to its $6.5 billion Malaysian sovereign wealth fund, saying it would seek billions in fines as well as jail time for key figures involved in the scandal.

Criminal charges were filed against former Goldman executives Tim Leissner and Roger Ng Chong Hwa, as well as a former employee of 1MDB, Jasmine Loo Ai Swan and Low Taek Jho (commonly known as Jho Low). Low is still a fugitive, and authorities are in the process of selling the yacht he bought for $250 million. His lawyers maintain he is innocent.

The fund, fully titled as 1Malaysia Development Berhad but usually abbreviated to 1MDB, is the subject of corruption and money-laundering investigations in at least six countries. The scandal may have gone all the way to the top of the company, with Goldman’s ex-CEO Lloyd Blankfein present at a meeting in 2009 to help establish ties with Malaysian officials before the launch of the fund.

“Their fraud goes to the heart of our capital markets, and if no criminal proceedings are instituted against the accused, their undermining of our financial system and market integrity will go unpunished,” Malaysia’s Attorney General Tommy Thomas said in a release on Monday.

Goldman earned roughly $600 million in fees for raising $6.5 billion for the fund. Malaysia on Monday said $2.7 billion from the proceeds of three 1MDB bonds was misappropriated.

“Malaysia considers the allegations in the charges against all the accused to be grave violations of our securities laws, and to reflect their severity, prosecutors will seek criminal fines against the accused well in excess of the $2.7 billion misappropriated from the bonds proceeds, and $600 million in fees received by Goldman Sachs, and custodial sentences against each of the individual accused: the maximum term of imprisonment being 10 years,” the release said.

A Goldman Sachs spokesman responded, saying in an email on Monday: “We believe these charges are misdirected, will vigorously defend them and look forward to the opportunity to present our case. The firm continues to cooperate with all authorities investigating these matters.”

The alleged fraud was spectacular, according to legal documents related to the case filed in the US. They claim that Low diverted millions in investment money to fund his own lavish lifestyle of yachts, parties, jewellery, and celebrities. Some the money allegedly went to fund the movie The Wolf of Wall Street. Leonardo DiCaprio won an Oscar for the film and namechecked Low in his speech. At another point, Low dated model Miranda Kerr, who was later required to return jewellery he had given her.

Analysts have said Goldman might have to set aside $500 million to $1 billion for legal reserves in the next few quarters to prepare for potential fines. The bank does not disclose its total reserves.

Business Insider Nordic | December 17, 2018