GOLDMAN Sachs Group Inc has started legal action against Malaysia in a UK court over to an ongoing dispute concerning a settlement related to the bank’s role in the 1MDB investment fund scandal, Bloomberg reports.

A spokesman for the New York-based bank said in an email that the bank has initiated arbitration proceedings against the government of Malaysia for breaching its obligations to properly credit assets against the guarantee offered by Goldman Sachs in a settlement agreement and to recover other assets.

Executives at the Wall Street firm had grown increasingly frustrated with Malaysia’s demands to amend the 2020 agreement in a manner that would impose more stringent penalties. They were dissatisfied with the lack of transparency regarding the assets that the nation had been recovering from the scandal.

The formal complaint was submitted to the London International Court of Arbitration on Wednesday, a source familiar with the matter said.

The 1MDB sovereign wealth fund was at the centre of a multibillion-dollar scandal that triggered investigations across several countries. Goldman Sachs had confessed to its involvement in the largest foreign bribery case in the history of US enforcement. This led to multiple international settlements surpassing US$5 billion, with the bank’s role in raising funds for 1MDB being a focal point.

As part of a 2020 settlement with Malaysia, Goldman Sachs made an initial payment of US$2.5 (RM11.8) billion in September of that year. The bank also guaranteed the return of US$1.4 billion worth of 1MDB assets that had been seized by authorities worldwide in exchange for Malaysia dropping criminal charges against the firm and agreeing not to file new ones.

Goldman Sachs also committed to making an interim payment of US$250 million if, by August 2022, Malaysia did not receive at least US$500 million in assets and proceeds, as specified in the settlement agreement. Public filings from the bank have revealed that the two parties have been embroiled in a dispute over this provision.

The Malaysian government recently threatened to sue Goldman Sachs if the bank did not agree to renegotiate the terms of the settlement.

“They are taking us for granted; they think that we’ll not proceed,” Prime Minister Anwar Ibrahim said.

” There’s nothing for us to lose except the legal fees, which a government can manage. But it’s also the integrity of Goldman Sachs that’s in question.” – October 12, 2023.