Goldman Sachs Group (NYSE:GS) is facing increasing scrutiny from the Malaysian government over its request for arbitration related to a $3.9 billion settlement deal from a criminal probe into the 1MDB corruption scandal. The bank's move has been labeled as premature by Malaysia's 1MDB task force. The task force chairman, Johari Abdul Ghani, accused Goldman of evading its interim payment obligation.
The legal action follows Prime Minister Anwar Ibrahim's threat to sue Goldman Sachs, which earned $600 million in fees from two bond offerings that helped raise $6.5 billion for 1MDB. The U.S. Justice Department, along with Malaysian authorities, estimate that approximately $4.5 billion was stolen from 1MDB between 2009 and 2014 in a global scheme implicating high-ranking government and banking officials.
On Thursday, the Attorney-General's Chambers (A-GC) in Kuala Lumpur confirmed receiving an arbitration request from Goldman Sachs regarding their settlement in the multi-billion-dollar 1MDB scandal. This scandal implicated former prime minister Datuk Seri Najib Razak and is under scrutiny by US prosecutors. The A-GC denies all allegations and commits to a legal response that prioritizes the interest of the Malaysian people.
In 2020, Goldman Sachs agreed to pay Malaysia US$2.5 billion and return US$1.4 billion in assets, which resulted in dropped criminal charges against them. The government also sought the return of US$600 million in fees that Goldman Sachs had earned from bond sales related to the 1MDB fraud scheme. This led to Goldman Sachs admitting misconduct involving two former employees.
A dispute arose on Aug 18, 2022, over a US$250 million interim payment due to an unrecovered US$500 million. This dispute is ongoing, with a Nov. 8 deadline set for settlement before Malaysia initiates arbitration proceedings.
The 1MDB scandal has seen several key figures implicated, including ex-Malaysian leader Najib Razak, now serving a 12-year jail term. The funds were used to finance "The Wolf of Wall Street". Accused plot architect Low Taek Jho is an international fugitive. Ex-Goldman banker Roger Ng Chong Hwa, sentenced and repatriated to Kuala Lumpur for asset recovery, and his ex-boss Tim Leissner, ordered to pay $43.7 million after a guilty plea, are also key figures in the scandal.
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