Malaysia’s new government, led by 92-year-old Prime Minister Mahathir Mohamad, has vowed to bring back billions of dollars allegedly stolen from state investment fund 1Malaysia Development Bhd (1MDB).
The alleged misappropriation of US$4.5 billion from the fund, founded by ousted prime minister Najib Razak, is under investigation by the US Department of Justice and other nations such as Switzerland and Singapore.
In the past three years, the scandal has led to arrests, the shuttering of several banks and seizures of multimillion-dollar assets around the world. It also played a role in the ouster of Najib in the election on Wednesday last week, political analysts have said.
The case has dogged Najib since the Wall Street Journal reported in August 2015 that about US$700 million in 1MDB funds flowed into his personal account.
US Justice Department lawsuits later showed that he received transfers of more than US$1 billion from 1MDB.
Najib has denied any wrongdoing.
The details of the case are as follows:
WHAT IS 1MDB?
1MDB is a state investment fund founded in 2009 by Najib, who chaired the fund’s advisory board until 2016.
The fund, aimed at promoting economic development, was set up allegedly with the help of Malaysian financier Low Taek Jho (劉特佐), better known as Jho Low.
HOW DID US$4.5 BILLION GO MISSING?
Between 2009 and 2013, 1MDB raised billions of dollars in bonds for use in investment projects and joint ventures.
With the aid of several high-level 1MDB officials, their associates and bankers, the US Justice Department said US$4.5 billion was instead diverted to offshore bank accounts and shell companies, many of which were linked to Low and some of his associates.
The siphoned funds were allegedly used to buy luxury assets and real estate for Low and his associates.
Since July 2016, the US Justice Department has filed civil lawsuits seeking to seize a total of US$1.7 billion in 1MDB-linked assets.
The assets include gifts given by Low to celebrity friends, such as a Picasso painting for Hollywood actor Leonardo DiCaprio and jewelry for Australian model Miranda Kerr, the lawsuits say.
DiCaprio and Kerr have since handed the items to US authorities and say they are cooperating with the investigation.
Other assets include a private jet; real estate in London, Los Angeles and New York; and a US$107 million stake in EMI Music Publishing.
Low, through spokesmen, has consistently denied wrongdoing. His current whereabouts are unknown.
HOW WAS NAJIB INVOLVED?
According to the US Justice Department, other beneficiaries of 1MDB funds included Riza Aziz, Najib’s step-son and a friend of Low’s.
Some of the funds were used to finance the Hollywood films The Wolf of Wall Street and Dumb and Dumber To, both produced by Red Granite, a film company cofounded by Riza.
Red Granite has agreed to pay US$60 million to the US as part of a settlement deal.
A person described in the US lawsuits as “Malaysian Official 1” was said to have received more than US$1 billion in 1MDB funds, some of which was used to buy jewelry for the person’s wife.
US and Malaysian sources have said that “Malaysian Official 1” refers to Najib.
Riza and Najib have consistently denied wrongdoing.
The Malaysian government said the money in Najib’s account was a donation from a member of the Saudi Arabian royal family.
WHICH NATIONS ARE INVESTIGATING 1MDB?
At least six nations have launched financial mismanagement, criminal and money-laundering probes into 1MDB’s business dealings.
Malaysia’s attorney general cleared Najib of wrongdoing in 2016, saying that the funds in his account were a legitimate donation.
However, the country’s central bank has fined 1MDB and several banks for unspecified breaches of banking regulations.
As part of an extensive review into 1MDB-related transactions, Singapore shut down the local units of Swiss bank BSI and Falcon Bank in 2016 — citing failures of money-laundering controls and improper conduct by senior management — froze millions of dollars in bank accounts and charged several private bankers.
In Switzerland, financial watchdog FINMA has confiscated 104 million Swiss francs (US$104.03 million) in illicit profits from 1MDB-related deals by banks BSI, Falcon and Coutts & Co since the middle of 2016.
US prosecutors last year requested a stay on its civil lawsuits to conduct a criminal probe.
US and Indonesian authorities in February seized the Equanimity, a US$250 million yacht believed to be owned by Low and bought with 1MDB funds, at a port in Bali, Indonesia.
WHAT IMPACT HAS 1MDB HAD IN MALAYSIA?
Najib withstood multiple calls to resign and sacked the deputy prime minister and the attorney general in actions seen linked to the scandal.
The government has also taken steps seen by critics as limiting discussion of 1MDB, including detaining civil rights activists, suspending a newspaper and blocking Web sites and blogs.
Mahathir in 2016 resigned from the ruling coalition, saying that he was disgusted by the 1MDB scandal, and later joined forces with opposition leader Anwar Ibrahim, his former foe.
Their alliance succeeded in ousting Najib in a stunning election win on Wednesday last week, with political analysts crediting public anger over 1MDB as a key factor.
HOW WILL MAHATHIR DEAL WITH 1MDB?
After being sworn in as prime minister, Mahathir vowed to investigate 1MDB and said Najib “would face the consequences” if he was found to have broken any laws.
He also said he would review the conduct of and possibly replace the heads of government departments that previously investigated the scandal, including the anti-corruption commission and the attorney general who cleared Najib.
Mahathir is also planning to appoint a finance ministry adviser who would oversee efforts to investigate and recover 1MDB funds abroad, two sources told Reuters.
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