Imagine a Boeing plane, modified as a grand casino, that flew big-shots like Leonardo DiCaprio and Jamie Fox to Australia and Las Vegas in one single night, just so that they could count down the new year twice. You would have hoped this was a joint expenditure, but the experience came out of just one pocket; that of a Malaysian financier, Jho Low.
At least for most of the examples we see, such extravagance comes through ethical wealth. But with this gentleman, as you might have already guessed, that is not the case. Jho Low, readers, was the true mastermind behind one of the biggest financial scandals in history.
Along with the new year’s celebration, Low spent millions at parties and casinos with the Hollywood elite and also funded the production of The Wolf of Wall Street starring DiCaprio, who he was close friends with. The film, ironically, is a cautionary tale about a millionaire living a lavish lifestyle and sustaining it through illegal and unethical means. These are only a few of the avenues that the billions of dollars siphoned from Malaysia’s Sovereign Wealth Fund were spent.
The misuse of the Malaysian government’s 1Malaysia Development Berhad (1MDB), a strategic development company, brought tales of lavish spending, massive corruption, and a long search for truth that embarrassed the country and its political elite. Being called “one of the world’s greatest financial scandals”, the scandal has been reported on by various outlets. Here is how it went down
Jho Low, a Malaysian businessman and entrepreneur who the then Prime Minister of Malaysia Najib Razak ‘consulted’ on various financial matters, including Malaysia’s Sovereign Wealth Fund. Goldman Sachs, an American investment bank known to be a little edgier and wanted to be at the forefront of investments in Asia, when they caught wind that Malaysia’s Sovereign Fund was seeking investors, they leapt at the opportunity.
With the help of Goldman Sachs, Low convinced investors that 1MDB was supposed to help Malaysia create infrastructure and increase development. Roger Ng and Tim Leissner, Goldman Sachs bankers, helped Low and Razak pull off the heist.
To legitimise 1MDB, Goldman Sachs paired it with other SWFs, which attracted investors. Instead of all the money going into the proposed investments, Low siphoned a portion into shell companies to pay people off and for his use and enjoyment. Goldman Sachs, however, walked away with 200x the ‘fees’ that banks usually charge for deals of this size.
With the help of Goldman Sachs, Najib and Low stole $4.5B from Malaysia between 2009 to 2014. $1.4B were siphoned from the fund to Low’s shell companies for his various other personal investments. Goldman Sachs walked away with $600M, which is said to be 200x what banks usually take.
Due to documents leaked to news outlets like The Wall Street Journal, the scandal broke out, and 1MDB was found to be $10B in debt. $700M was allegedly found to have been transferred into Najib’s accounts which he attributed to donations and had nothing to do with the 1MDB scandal, which Najib was later cleared of any wrongdoing.
Najib was fired and had most of the agencies investigating him raided in a desperate attempt to avoid any alleged wrongdoing coming to light. He was successful until 2018 when the opposition came into power on an anti-corruption platform and clamped down on Najib and the people involved in the fraud.
Various pieces of evidence in jewellery and other possessions were found at Najib’s properties, and he was later convicted and sentenced to 12 years in prison. Jho Low disappeared with all the stolen assets and is currently living in China. One of the Goldman Sachs bankers involved in the scandal, Roger Ng, was recently found guilty.
Sovereign Wealth Funds can save economies from collapsing when utilised for their intended purposes. However, when under the control of the wrong hands, they can cause an unimaginable financial burden on the taxpaying citizens of the country in which the Fund was based.
The 1MDB scandal, however exciting it might be to read about the excess and luxuries that Jho Low and Prime Minister Najib Razak indulged in, it must be kept in mind that innocent tax-paying citizens have had to and are still paying for it as well as the political and financial institutes of Malaysia losing credibility and respect. The effects of the 1MDB scandal don't only span decades and continents but may also span across generations of innocent Malaysian citizens in the form of financial burden.