Goldman Sachs has made a pretty penny serving as an adviser to the politically connected 1Malaysia Development Bhd fund over the last several years. Now, however, the financial titan has been sucked into an ongoing investigation of the expanding 1MDB scandal.
According to knowledgeable sources who spoke to the Wall Street Journal this week, federal investigators at the FBI and the Justice Department have begun examining Goldman Sachs’s role in a series of transactions with 1MDB related to a broader investigation into possible money laundering and corruption at the Malaysian fund.
More on 1MDB scandal
Analysts highlight that the expanding 1MDB scandal (investigators in five countries are currently probing 1MDB) makes clear the risk-filled path that Goldman Sachs has opted for in emerging markets in search of greater profits.
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The exact amount Goldman has made from working with 1MDB is not known, but it could very well top $1 billion. GS consulted during the founding of 1MDB, as well as advised the fund on three acquisitions and set up the sale of $6.5 billion in bonds. The bond sale by itself led to more than $600 million in fees for, according to sources familiar with the matter.
Now 1mdb is embroiled in a scandal involving billions of dollars of missing money, and has created a political crisis for Malaysian Prime Minister Najib Razak, who supervises the fund. Malaysian investigators have already traced close to $700 million that has allegedly flowed into Najib’s bank accounts through agencies, banks and companies connected to 1MDB. Malaysia’s anticorruption agency eventually claimed the funds came from an anonymous Middle Eastern donor.
The investigation hasn’t determined exactly what happened to the funds that went into the prime minister’s supposed personal accounts. A number of transactions by the fund are under investigation by the U.S. FBI and Justice Department, and also by law enforcement in Malaysia, Singapore, Hong Kong and Switzerland.
Malaysian PM Najib continues to deny he has taken any money for personal gain. 1MDB has stated that all monies were paid out to fulfill the fund’s financial obligations and that it was cooperating fully with all investigations.
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Also of note, in the early 2000s Goldman Sachs was also involved in a series of controversial transactions with the Libyan Investment Authority under Muammar Qaddafi that have led to legal action today. The Libyan sovereign-wealth fund filed a lawsuit in 2014 claiming that GS took advantage of its inexperienced execs to sell them complicated, money-losing investments. Goldman has denied the claims, and a trial in the suit will start next year in London.
According to the LIA, Goldman Sachs was paid more than $350 million for executing nine trades for Libya.