Malaysia files criminal charges against Goldman Sachs

Sachs has been hit by criminal charges in Malaysia for offences related to the misappropriation of $2.7 billion from the proceeds of three bonds issued by subsidiaries of 1MDB.

As a recap, 1MDB is the 1Malaysia Development Berhad development company, wholly owned by the Government of Malaysia. It was established to create long-term economic development for the country through partnerships and promoting foreign direct investment.

Back in October 2016,  three banks – Falcon Private Bank, DBS and UBS – came under the spotlight for alleged money laundering activities in linked to 1MDB.

In the Malaysian matter, Jabatan Peguam Negara, the Attorney-General’s Chambers in Malaysia, says the charges were filed today (17 December) for offences under the securities laws of Malaysia against subsidiaries of Goldman Sachs investment bank, and its key employees, Tim Leissner and Roger Ng Chong Hwa (who will be charged shortly), together with former employee of 1MDB, Jasmine Loo Ai Swan and Low Taek Jho (commonly known as Jho Low).

The Attorney-General says: “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.

“Having held themselves out as the pre-eminent global adviser / arranger for bonds, the highest standards are expected of Goldman Sachs. They have fallen far short of any standard. In consequence, they have to be held accountable.”

The charges arise from the commission and abetment of false or misleading statements by all the accused to take $2.7 billion from the proceeds of the bonds, which were arranged and underwritten by Goldman Sachs. The three bonds had a total face value of $6.5 billion.

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A Goldman Sachs spokesperson says the bank disputes the allegations and will defend itself against the accusations.

According to the Malaysian Attorney-General, Goldman Sachs benefited by receiving underwriting and arranging fees of approximately $600 which was “several times higher than the prevailing market rates and industry norms”.

In addition to personally receiving part of the misappropriated bond proceeds, those employees and directors of Goldman Sachs “received large bonuses and enhanced career prospects at Goldman Sachs and in the investment banking industry generally”.

The Malaysian Attorney-General says the scheme was designed and crafted by the accused to fraudulently structure the bonds for ostensibly legitimate purposes when they knew that the proceeds thereof would be misappropriated and fraudulently diverted by the accused themselves was planned and executed to defraud the Government of Malaysia and the purchasers of the bonds.

Malaysia will seek criminal fines against the accused “well in excess” of the $2.7 billion and $600 million figures cited above, and custodial sentences against each of the individual accused: the maximum term of imprisonment being ten years.

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