Malaysia this morning filed criminal charges against US-based Goldman Sachs over its dealings with the scandal-ridden investment fund 1Malaysia Development Berhad (known as 1MDB).
Attorney general Tommy Thomas said in a statement Monday that the New York-headquartered investment bank stands accused of "grave violations" of Malaysia's securities laws. The development is the first time Goldman Sachs has faced formal criminal charges in the ongoing 1MDB scandal. The investment bank has repeatedly denied any wrongdoing.
In addition, four former employees of Goldman Sachs are also charged in connection with 1MDB. If convicted, Malaysia is seeking to impose jail terms of up to 10 years for each.
Thomas said in a statement: "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."
He added: "The charges arise from the commission and abetment of false or misleading statements by all the accused in order to dishonestly misappropriate $2.7bn from the proceeds of three bonds issued by the subsidiaries of 1MDB, which were arranged and underwritten by Goldman Sachs."
The case relates to bond sales that Goldman Sachs underwrote for the state investment fund in 2012-13. Goldman Sachs helped to raise $6.5bn for 1MDB, in the form of various bond offerings.
America's Department of Justice alleges some $4.5bn was misappropriated from 1MDB. Najib Razak, the former prime minister of Malaysia, has been charged with corruption for his part in the scandal. Razak unexpectedly lost a general election in May this year - a fall largely attributed to his links to the 1MDB scandal. He denies wrongdoing.
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