A Middle Eastern investment giant is suing Goldman Sachs over the 'massive international conspiracy' of the 1MDB scandal

Chris Jung/NurPhoto via Getty Images
  • Abu Dhabi’s IPIC filed a lawsuit against Goldman Sachs on Wednesday to recover losses from 1MDB scandal.
  • The US investment Bank is being scrutinised for its role in the scandal, which saw $US4.5 billion misappropriated.
  • Goldman said it expects to “contest the claim vigorously.”
  • Morgan Stanley downgraded the rival lender as accusations against the bank furthered.

US investment banking giant Goldman Sachs is facing the music over the One Malaysia Development Berhad (1MDB) fund scandal.

Abu Dhabi’s International Petroleum Investment Company (IPIC) filed a lawsuit in New York on Wednesday against Goldman Sachs and others, according to The Wall Street Journal.

The civil action by IPIC, a former partner of 1MDB, claims that Goldman and others “played a central role in a long-running effort to corrupt former executives of IPIC and its subsidiary Aabar Investments, and mislead IPIC and Aabar.”

IPIC added that it believed the scandal was “a massive, international conspiracy to embezzle billions of dollars.”

Goldman Sachs did not immediately respond to Business Insider’s requests for comment. It told the Journal: “We are in the process of assessing the details of allegations and fully expect to contest the claim vigorously.”

Goldman’s stock is down 24.4% for the year to date and was recently downgraded by rival lender Morgan Stanley on the back of uncertainty around the investigation.

Read more: 2 major brokerages are suing Goldman Sachs for blocking their clients from investing in IPOs

1MDB was set up by former Malaysian Prime Minister Najib Razak in 2009 and has been major financial scandal since 2015. An estimated $US4.5 billion was misappropriated from 1MDB by high-level officialsand their associates between 2009 and 2014, the US Justice Department has alleged. Najib has consistently denied wrongdoing.

In 2015, billions of dollars of loans issued by 1MDB, arranged by Goldman Sachs, were guaranteed by IPIC. IPIC claimed the fund defaulted on $US1.1 billion in repayments in 2016 and Malaysia’s then-government agreed to pay the UAE investment fund, a settlement which has since been challenged by the country’s new government.

Timothy Leissner, a former partner for Goldman Sachs in Asia who was named in the IPIC lawsuit, previously pleaded guilty to conspiracy to launder money, and agreed to forfeit $US43.7 million. Fellow Goldman Sachs banker Roger Ng, who was previously arrested in Malaysia at the request of US authorities, is also named in the legal action.

Goldman has been under scrutiny for its role in helping 1MDB raise funds through $US6.5 billion in bond offerings in 2012 and 2013, from which it earned around $US600 million in fees – a higher amount than usual, according to critics.

The 1MDB investigations in the US and Malaysia have gathered pace since Najib unexpectedly lost a general election in May to Mahathir Mohamad, who returned to power 15 years after he retired as prime minister.

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