What started out as a political scandal involving a politician and a strategic development company, has now spread into an international litigation warfare, with lawsuits and claims being filed in multiple jurisdictions. The 1MDB scandal started in 2015 when Malaysia’s then-Prime Minister Najib Razak was accused of channelling over approximately USD$700 million from the fund to his personal bank accounts. Now, the scandal has implicated many banks and companies along with their executives, with the total sum siphoned believed to be in the several billion.

Goldman’s reputation has taken a major hit, as former senior partner, Tim Leissner, and his former deputy, Roger Ng, face charges. Leissner pled guilty to charges of money laundering and bribery. This comes after Leissner is believed to have bribed officials to secure Goldman’s involvement in raising $6.5bn in bonds for 1MDB, which the bank earned a hefty $600m in fees. His former Deputy, Roger Ng, is facing a US extradition request and faces additional charges in Malaysia, which he has denied. To make matters worse, the bank will have difficulty maintaining its innocence as Lloyd Blankfein, the former Goldman chief executive, met Jho Low, the Malaysian financier accused of masterminding the fraud.

The bank has faced a long line up of lawsuits from the US, Malaysia, Kuala Lumpur, and the Abu Dhabi. Mr Low and Mr Ng was indicted by the US Department of Justice in November 2018. One month later, Malaysian prosecutors filed criminal charges against Goldman Sachs International, Goldman Sachs Asian and Goldman Sachs Singapore, three of Goldman units, in addition to Mr Leissner, Mr Ng and Mr Low. Abu Dhabi’s International Petroleum Investment Company (Ipic), which guaranteed billions of dollars of bonds arranged by Goldman for 1MDB, also began a US legal action against the bank in late 2018. Kuala Lumpur also filed criminal charges against 17 current and former Goldman executives, accusing them of misleading 1MDB bond investors in August 2019.

Goldman Sachs isn’t the only firm who has came under fire following the scandal, with banks in Europe also facing scrutiny. There has been a handful of 1MDB cases in Switzerland, one focusing on the role of Switzerland’s Falcon Private Bank. Deutsche Bank and UBS have been contacted by the Malaysian government concerning their dealings with 1MDB. The former also faces investigation in the US, over whether money laundering or foreign bribery act laws were violated by the bank, in the course of raising $1.2bn for 1MDB in 2014.

With the Malaysian finance minister arguing that fines of USD$7.5 billion should be imposed on Goldman, the bank’s market value has tanked, plummeting by more than $USD8.5 billion in the past month. As the scandal has gathered pace, the prospects of Goldman seems gloomier by the day, with their future lying on their ability to prove that Leissner was a rogue employee, and completely disconnecting themselves from the scandal, in hopes of salvaging the trust of investors.

by Marcus Cheung

Rippling effects of the 1MDB Scandal