Malaysia files criminal charges against Goldman Sachs and 2 ex bankers, saying it seeks fines ‘well in excess’ of $2.7 billion

The former Goldman Sachs CEO Lloyd Blankfein.

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The former Goldman Sachs CEO Lloyd Blankfein.
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Jonathan Ernst/Reuters

  • Malaysia filed criminal charges against Goldman Sachs and two former executives over what it called “grave violations of our securities laws” relating to its $6.5 billion sovereign wealth fund.
  • Malaysia says prosecutors will seek criminal fines and jail time for the former Goldman executives Tim Leissner and Roger Ng Chong Hwa.
  • “These charges are misdirected, will vigorously defend them and look forward to the opportunity to present our case,” Goldman Sachs told Business Insider.
  • Goldman Sachs’ stock price dropped around 2% in pre-market trading after the report.

Malaysia has filed criminal charges against Goldman Sachs and two of its executives over what the country called “grave violations of our securities laws” relating to its $6.5 billion sovereign wealth fund, saying it would seek billions in fines as well as prison time in connection to the scandal.

Criminal charges were filed against the former Goldman executives Tim Leissner and Roger Ng Chong Hwa as well as a former employee of the fund, Jasmine Loo Ai Swan, and Low Taek Jho (commonly known as Jho Low). Low is still a fugitive, with authorities selling a yacht he bought for $250 million. His lawyers maintain he is innocent.

The fund, fully titled as 1Malaysia Development Berhad but usually abbreviated to 1MDB, is the subject of corruption and money-laundering investigations in at least six countries. The scandal may have gone all the way to the top of the company, with Goldman’s CEO at the time, Lloyd Blankfein, present at a meeting in 2009 to help establish ties with Malaysian officials before the launch of the fund.

“Their fraud goes to the heart of our capital markets, and if no criminal proceedings are instituted against the accused, their undermining of our financial system and market integrity will go unpunished,” Malaysian Attorney General Tommy Thomas said in a release on Monday.

Goldman earned roughly $600 million in fees for raising $6.5 billion for the fund. Malaysia on Monday said $2.7 billion of the proceeds of three 1MDB bonds was misappropriated.

Read more: A $4.5 billion corruption scandal allegedly linked to a Goldman Sachs exec who married Kimora Lee Simmons is coming to an end

“Malaysia considers the allegations in the charges against all the accused to be grave violations of our securities laws, and to reflect their severity, prosecutors will seek criminal fines against the accused well in excess of the $2.7 billion misappropriated from the bonds proceeds, and $600 million in fees received by Goldman Sachs, and custodial sentences against each of the individual accused: the maximum term of imprisonment being 10 years,” the release said.

A Goldman Sachs spokesman responded, saying in an email on Monday: “We believe these charges are misdirected, will vigorously defend them and look forward to the opportunity to present our case. The firm continues to cooperate with all authorities investigating these matters.”

Legal documents related to the case filed in the US paint a picture of a spectacular fraud. They claim that Low diverted millions in investment money to fund his own lavish lifestyle of yachts, parties, jewelry, and celebrities. Some the money is alleged to have funded the movie “The Wolf of Wall Street.” Leonardo DiCaprio won a Golden Globe Award for the film and name checked Low in his speech. At another point, Low dated the model Miranda Kerr, who was later required to return jewelry he gave her.

Analysts have said Goldman may have to set aside $500 million to $1 billion for legal reserves in the next few quarters to prepare for the possibility of fines. The bank does not disclose its total reserves.

The company’s stock price dropped close to 2% in pre-market trading in New York.