By Melissa Cox
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1Malaysia Development Berhad (1MDB), was initially founded in 2009 in order to fund infrastructure projects in Malaysia as well as to finance other economic-related deals. However, it soon came to light that 1MBD was being abused in order to fund lavish lifestyles, and even fund Hollywood productions such as ‘The Wolf of Wall Street’. Corrupt officials also used 1MDB to fund personal spending, and purchases including Pablo Picasso artworks, fine jewellery and a luxury super Yacht, now worth £95m. The US Justice Department has found that $4.5bn USD was received by corrupt officials through using offshore accounts and shell companies.
The main character of the scandal is believed to be Malaysian businessman Jho Low, who had a large part to play in the creation of 1MDB in 2009. He is also seen as the individual who had the most extreme spending habits, including funding the ‘Wolf of Wall Street’, throwing extravagant parties with A list Hollywood celebrities, as well as being the owner of the £95m luxury yacht.
It is believed that at one point in time he had the more liquid assets than anyone else in the world. However, he has been on the run for years now and is believed to be hiding out in China. He was charged by the Malaysian Government in 2016 for money laundering and corruption. He is also wanted in the US and Singapore for similar charges but has not been seen yet.
Another main figure in the scandal is former Prime Minister of Malaysia, Najib Razak, who had become PM a few months before 1MDB was created in 2009. He is now believed to be “Malaysian Official 1”, mentioned in US lawsuits and accused of receiving around $1bn USD from 1MDB, which was used for personal purchases. He lost the re-election in 2018 and was then hit with 42 criminal charges in the same year. He continues to plead not guilty to all accusations, but as of July 2020 has been sentenced to 12 years in jail, however, all his trials are yet to be completed, so this number is likely to increase.
Investment bank Goldman Sachs has been targeted by investigations regarding their bond deals between their HK branch and 1MDB in 2012. Between 2012-2013 Goldman Sachs arranged three bond deals worth $6.5bn USD, while they received almost $600m USD in fees, a lot more than usual rates. Out of the $6.5bn USD raised by Goldman Sachs, $2.7bn USD is believed to have been misappropriated by 1MDB. Goldman Sachs has been accused of making untrue statements related to the bonds, and Tom Leissner, the then Goldman Sachs regional executive was investigated by the FBI regarding his relations to Najib Razak. Leissner was charged at the same time as 1MDB’s Jho Low.
As of 2020, the scandal is still developing, and consequences are still being suffered. Large infrastructure projects in Malaysia have been constantly delayed due to money lost from 1MDB’s activities. In 2019, the US agreed to return around $200m USD to Malaysia from seized properties and other assets that were related to 1MDB. Earlier this year, Goldman Sachs agreed to a $3.9bn USD settlement with the Malaysian Government regarding the 1MDB scandal, meaning that the amount in penalties they will pay is around $5bn USD. This will be sent out to regulators worldwide, in order to stop probes into their role within the 1MBD scandal.
The investigations into the 1MDB scandal are still being carried out by at least 6 different countries as more developments are being made. Since 2016, FINMA (the Swiss government body responsible for financial regulations) has confiscated over $100m USD in illicit profits that came from various 1MDB deals. The US Justice Department is still looking for money that they can recover from 1MDB assets and return to the Malaysian government, and to find those who are guilty and hold them accountable.
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