Goldman Sachs sues Malaysia over 1MDB settlement

On Wednesday, Goldman Sachs Group (GS.N) took legal action against Malaysia in a UK court, marking an escalation in the ongoing tensions surrounding a settlement agreement pertaining to the bank's involvement in the extensive 1MDB corruption scandal, which involves billions of dollars.

According to a bank spokesperson, “Today, we have initiated arbitration proceedings against the Malaysian Government, alleging a breach of their obligations in terms of crediting assets against the guarantee outlined in our settlement agreement with Goldman Sachs. Our action also seeks the recovery of other assets.”

A source revealed that the arbitration has been officially lodged with the London Court of International Arbitration. This legal action was initially reported by Bloomberg News.

Requests for comments directed to the office of the Malaysian Prime Minister, Anwar Ibrahim, and the Attorney General's Chambers remained unanswered at the time of this report.

Less than two months ago, Anwar had issued a warning about taking Goldman Sachs to court. The dispute revolves around a settlement agreement from 2020, in which Goldman Sachs had committed to a payment of $3.9 billion to resolve Malaysia's criminal investigation into its involvement in the scandal.

According to a regulatory filing made earlier this year, Goldman Sachs is obligated to make a one-time interim payment of $250 million if, by August 2022, the Malaysian government has not received a minimum of $500 million in assets and proceeds.

However, a point of contention arises as the two parties are in disagreement regarding whether Malaysia has indeed recovered at least $500 million by August 2022 and whether any interim payment is owed, as stated by Goldman.

The extensive scandal involved an estimated $4.5 billion embezzled from the 1MDB sovereign wealth fund in an elaborate global scheme, implicating high-level officials within the fund, former Malaysian Prime Minister Najib Razak, Goldman Sachs employees, and others, as confirmed by Malaysian and U.S. authorities.

Prosecutors have alleged that Goldman Sachs assisted 1MDB in raising $6.5 billion through bond sales, and in the process, the bank earned fees totaling $600 million.

Meanwhile, the United States has been repatriating funds obtained from confiscated assets that were purportedly purchased with misappropriated 1MDB funds.