Goldman Sachs settles 1MDB case with Malaysia for $3.9bn

Criminal charges against three units of the investment bank set to be dropped

Goldman Sachs headquarters in New York. Settlement with Malaysia follows investment fund scandal dating back to 2012 and 2013. Photograph: Jeenah Moon/Bloomberg

Goldman Sachs headquarters in New York. Settlement with Malaysia follows investment fund scandal dating back to 2012 and 2013. Photograph: Jeenah Moon/Bloomberg

 

The Malaysian government has agreed to a $3.9 billion (€3.37 billion) settlement with Goldman Sachs over losses suffered from a multibillion-dollar scandal at the country’s 1MDB investment fund.

The settlement, which was reached on Friday, includes a cash payment of $2.5 billion to the Malaysian government as well as a Goldman guarantee that Kuala Lumpur will receive at least $1.4 billion in assets acquired with proceeds misappropriated from 1MDB.

“This settlement represents assets that rightfully belong to the Malaysian people,” Zafrul Aziz, Malaysia’s minister of finance, said in a statement. “We are confident that we are securing more money from Goldman Sachs compared to previous attempts, which were far below expectations.”

The ministry said the last offer from Goldman was for $1.75 billion and was made to the previous administration of former prime minister Mahathir Mohamad in 2019.

Goldman in 2012 and 2013 arranged three bonds for 1MDB worth $6.5 billion, much of which was ultimately stolen, and received $600 million in fees – a sum Malaysia has said was excessive. The bank declined to comment.

Criminal charges

A person familiar with the matter said that as part of the settlement, Malaysia would drop criminal charges against three Goldman units accused of helping “dishonestly misappropriate” $2.7billion from the 1MDB bonds issued in 2012 and 2013.

Kuala Lumpur would also end legal proceedings against 17 former and current Goldman directors accused of misleading 1MDB bond investors, said the person. Legal proceedings against two former Goldman bankers accused of taking part in the fraud would continue, they added.

The US Department of Justice alleges a total of $4.5 billion was misappropriated from 1MDB.

Kuala Lumpur has also filed criminal charges against Jho Low, the Malaysian financier allegedly at the centre of the fraud who remains at large and denies wrongdoing.

Copyright The Financial Times Limited 2020