Goldman Sues Malaysia as 1MDB Settlement Dispute Escalates

Goldman Sachs Group Inc. took the unusual step of suing Malaysia in a UK court amid festering disagreement over a settlement tied to its role in the 1MDB investment-fund scandal.

(Bloomberg) — Goldman Sachs Group Inc. took the unusual step of suing Malaysia in a UK court amid festering disagreement over a settlement tied to its role in the 1MDB investment-fund scandal.

Executives at the Wall Street firm have grown increasingly frustrated with the country’s demands to redo its existing 2020 pact in favor of more onerous penalties, and the lack of information tied to the looted assets the nation has been recovering. 

“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,” a spokesman for the New York-based bank said in an emailed statement. 

The complaint was filed Wednesday in the London International Court of Arbitration, a person familiar with the matter said.

Malaysia said it was “quite surprised” by Goldman’s move and had given the bank multiple extensions on what it described as “good faith discussions to resolve any dispute amicably.” The government will respond and ensure that the interest of the country is safeguarded, Johari Abdul Ghani, chairman of the 1MDB Taskforce for Asset Recovery, said in a statement Thursday.

The 1MDB investment fund became the center of a multibillion-dollar scandal that spawned probes across continents. Months after striking the initial agreement in 2020, Goldman admitted to its role in the biggest foreign bribery case in US enforcement history, reaching multiple international settlements exceeding $5 billion for its part in raising funds for 1MDB.

The scandal contributed to the fall of former Malaysian Prime Minister Najib Razak’s government, and remains a political flashpoint for subsequent administrations. While Najib was imprisoned in 2022 for his role in the 1MDB fiasco, several cases against him are still grinding through the courts, and his party is back in government as part of rival Anwar Ibrahim’s ruling coalition. 

The 1MDB issue has received renewed attention with the return this month of a convicted former Goldman banker to Malaysia to help with the country’s own investigations. Police said they are counting on Roger Ng’s cooperation to recover as much as possible from the billions looted from the fund. Ng, a Malaysian, was scheduled to begin a 10-year prison sentence on Oct. 6, but US officials allowed the sentence to be deferred so that he could return to the Southeast Asian country.

As part of the 2020 settlement with Malaysia, Goldman made an initial $2.5 billion payment in September of that year. It also guaranteed the return of $1.4 billion of 1MDB assets seized by authorities worldwide in exchange for Malaysia agreeing to drop criminal charges against the firm and to not bring new ones. 

The bank also was required to make an interim payment of $250 million if Malaysia didn’t receive at least $500 million of assets and proceeds by August 2022, according to Goldman. The two sides have been locked in a disagreement over that, the bank has spelled out in public filings.

Malaysia’s Johari said the government was entitled to the $250 million interim payment, and that it had extended the deadline for its “good faith discussions” with Goldman to Nov. 8. Malaysia planned to begin arbitration proceedings on the interim payment should the two sides fail to reach a settlement by then, he said.

“The 1MDB Taskforce views Goldman Sachs’ initiation of arbitration proceedings as premature and without due consideration of necessary prerequisites,” said Johari, adding that the move appeared to be an attempt to detract and divert from their obligations.

–With assistance from Anisah Shukry.

(Updates with comment from Malaysia in fifth and last two paragraphs.)

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