Goldman Sachs sues Malaysia as 1MDB settlement dispute escalates

In an unprecedented move, Goldman Sachs Group Inc has filed a lawsuit against Malaysia in a United Kingdom court due to ongoing disputes over a settlement related to its involvement in the 1MDB investment-fund scandal. A spokesperson for the New York-based bank stated, “We filed for arbitration against the Government of Malaysia for violating its obligations to appropriately credit assets against the guarantee provided by Goldman Sachs in our settlement agreement and to recover other assets.”

Goldman Sachs executives have expressed increasing frustration with Malaysia’s demands to revise the existing 2020 pact with more severe penalties, as well as the lack of information regarding the recovered looted assets. The complaint was filed on October 11 in the London International Court of Arbitration, according to an insider.

The 1MDB investment fund scandal, which led to investigations across multiple countries, involved the misappropriation of billions of dollars. Goldman Sachs admitted its role in the largest foreign bribery case in US enforcement history months after reaching the initial agreement in 2020. The bank has since faced numerous international settlements totaling over US$5 billion (RM23.61 billion) for its involvement in raising funds for 1MDB.

Under the 2020 settlement with Malaysia, Goldman Sachs initially paid US$2.5 billion (RM11.81 billion) in September of that year. The bank also guaranteed the return of US$1.4 billion (RM6.61 billion) worth of 1MDB assets seized globally, in exchange for Malaysia dropping criminal charges against the firm and refraining from filing new ones.

Additionally, Goldman Sachs was obliged to make an interim payment of US$250 million (RM1.18 billion) if Malaysia did not receive at least US$500 million (RM2.36 billion) in assets and proceeds by August 2022, according to the bank’s statement. The disagreement over this matter has been publicly disclosed in the bank’s filings.

Malaysia’s government recently threatened to sue Goldman Sachs if the bank did not renegotiate the settlement. Prime Minister Anwar Ibrahim stated, “They are taking us for granted, they think that we’ll not proceed. There’s nothing for us to lose except for the legal fees, which a government can manage. But it’s also the integrity of Goldman Sachs that’s in question.”