Criminal charges were filed this week against leading investment bank Goldman Sachs by Malaysia’s Attorney General as part of ongoing investigations into Malaysia’s highly-controversial USD 2.7 billion 1MDB development fund scandal.

The charges were filed under Malaysia’s security laws against the NY banking giant and its former bankers Tim Leissner and Roger Ng, former 1MDB employee Jasmine Loo and financier Jho Low in connection with the bond offerings.

The Wall Street Journal cites that a statement confirmed that the bank omitted material information and published untrue statements with the prosecution claiming that out of USD 6.5 billion worth of bonds arranged by Goldman Sachs, USD 2.7 billion were embezzled, creating a USD 600 million profit for Sachs. Malaysia’s Attorney General Tommy Thomas stated:

“The charges arise from the commission and abetment of false or misleading statements by all the accused in order to dishonestly misappropriate USD 2.7 billion from the proceeds of three bonds issued by the subsidiaries of 1MDB, which were arranged and underwritten by Goldman Sachs.”

A Sachs spokesman responded that the charges were misdirected and the bank would cooperate with the investigation. If convicted those involved could face up to ten years imprisonment under Malaysian law and face fines well in excess of the allegedly misappropriated funds.

Speaking of the bank’s credibility following the accusations, Attorney General Thomas said that, “Having held themselves out as the pre-eminent global adviser/arranger for bonds, the highest standards are expected of Goldman Sachs. They have fallen short of any standard.”

In a statement quoted by the Wall Street Journal, Goldman Sachs said:

“At a time when some are calling for aggressive regulation of cryptocurrencies, this case illustrates the potential that exists for blockchain technology and cryptocurrency systems to create a positive disruption within the existing banking paradigm which permits or even encourages theft and inefficiency through opaque processes and practices.”

These unexpected views from the bank although numerous reports this year have suggested that Goldman Sachs is considering offering crypto custodial services for clients. The bank has hinted recently that they would be expanding on its crypto trading desk to develop a bitcoin derivative known as a “non-deliverable forward” due to demand from clients. The Sachs statement quoted by the Wall St Journal continued:

“The complete transparency offered by cryptocurrencies makes it very unlikely that a single sticky-fingered public official would realistically get away with diverting the better part of a billion dollars, aided and abetted by private bankers whose only real interest is in their fees – USD 600 million in this case.”

 

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