The disappearance of billions of dollars from Malaysia's sovereign wealth fund is the center of one of the world's biggest financial fraud.
The quantum of money that was stolen is so huge, it makes previous frauds look almost pedestrian by comparison.
More than $4.5 billion vanished from the 1Malaysia Development Berhad (1MDB).
1MDB a sovereign wealth fund was created by the government of Malaysia to improve the well-being of Malaysian people and to promote economic development in Malaysia through global partnerships and foreign direct investments.
➤ Accused:-
Mr. Najib Razak (Ex-Prime Minister of Malaysia).
Mr. Jho Low (Businessman).
Mr. Jho Low is accused of being master mind behind the world's biggest financial fraud.
➢ Mr. Jho Low grew up in "Penang" a small island in north Malaysia. He was from a well to do family, So he went to all these fancy schools like:- Harrow (England), Wharton (USA). He was always kind of seemingly among the rich kids, but he wasn't truly rich like other guys that were there, and that was what made these whole thing possible is these close relationship he forged.
➢ When Jho Low was studying in England at Harrow, he became friendly with a guy called Riza Aziz, who was Najib's stepson. Later Jho Low got in with the family of Najib Razak, who eventually became the Prime Minister of Malaysia.
➢ At his peak, Mr. Jho Low realized that there was so much money in the world, especially state-owned money, which is managed by sovereign wealth funds. So he persuaded the then Prime Minister Mr Najib Razak to setup a fund.
➢ In 2009, Then Prime Minister and Finance Minster Mr. Najib Razak launches 1MDB a Malaysian state-owned investment fund to promote economic development. The professional purpose of the fund was to attract development to Malaysia through foreign investments, by targeting investment opportunities in international financial centers, power plants, oil fields, and development zones in Bandar Malaysia.
STEPS;-
✒ At first, they borrowed from local banks in Malaysia, but they quickly hit a ceiling for how much they could borrow in that manner.
✒ So then they decided to graduate to the next level of borrowing #Bonds, but the problem was 1MDB has no credit rating and which made it harder to convince people to invest in it.
✒ It would have been impossible without the help of Investment bankers, here Goldman Sachs came into the picture.
✒ Goldman Sachs used their expertise to raise money and used their reputation to make 1MDB appear more legit than they actually were.
✒ Two Goldman banker Tim Leissner and Rogger Ng helped 1MDB to raise money from investors. Investors were told that their money would help pay for the power plant project, So to make the power plant deal look better, Goldman Sachs used their credibility and paid 1MDB up with Abu Dhabi's sovereign wealth fund "IPIC" and all of this was just to look it good for investors.
✒ The Goldman's Malaysian unit raised $6.5 billion for 1MDB by issuing bonds globally, but instead of heading to the power plant project most of the money was transferred into an account at Swiss private bank "BSI". And Goldman made $600 million as fees working on bond sales that raise $6.5 billion for 1MDB, which was far more than what they would normally make on a deal of that size.
Fraud Strategy;- (According to the US Dept. of justice)..
➧ One strategy involved setting up bank accounts under fake companies name.
➧ 2nd strategy involve moving funds from bank accounts to bank accounts adding layers & layers of complexity, until the original source of the fund is camouflaged.
💥All started by $3billion bond arranged by Goldman Sachs, that was issued by a wholly owned subsidiary of 1MDB incorporated in the British Virgin Island, and the proceeds were earmarked for a joint venture with a firm in Abu Dhabi, But instead of heading to the middle east most of the money was transferred into an account at swiss private bank BSI.
The department of justice claims, The money was sifted to investment funds in off shore center.
The money was wired (transferred) by a correspondent bank account at JP Morgan Chase in the USA to two accounts of Swiss Private Bank and Falcon Bank.
Funds went back and forth between these bank accounts adding layers upon layers of complication, gradually obscuring the origin.
➛The money was used to buy luxury Yachts, Private Plane, Big Hotels, Expensive Real-Estates, Arts, Jewelers, Gambling, and also to finance Hollywood movies like :- The Wolf of Wall Street.
➛The act extended across the globe and countries like United States, Singapore and Switzerland have launched their own investigation.
➛Bankers of Goldman Sachs have been charged and banned from re-entering the industry and jailed.
➛Singapore revoke the licenses of two swiss private banks.
➛ Former Prime Minister Najib Razak faces 25 charges over 1MDB, out of which 4 counts of abuse of power and 21 counts of money laundering.
Conclusion :-
They have not only stolen the money through commissions, but they have helped to destroy the economy and the confidence in the system.
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