Malaysian scam that could cost Goldman £500m

GOLDMAN Sachs could be forced to hand over more than £470m to Malaysian authorities over a corruption scandal at sovereign wealth fund 1MDB.

Politician Anwar Ibrahim – who is expected to be the country’s next prime minister – said Goldman must hand back the cash after raking in huge fees for advising on the fund.

It came as the bank was hit with a separate £5.2m fine for illegal trading in South Korea.

As much as £2.7bn was allegedly looted from 1MDB by those involved in running it, and used to buy New York apartments, hotels, yachts and a jet.

Money was even pumped into Hollywood films, it is claimed, including The Wolf Of Wall Street, a tale of financial excess starring Leonardo DiCaprio.

Two former Goldman bankers are facing criminal prosecution in the US, and the lender’s former boss, Lloyd Blankfein, met Jho Low, a financier accused of being at the heart of the scandal, at least twice.

Goldman earned £470m in fees through its work on 1MDB, and Ibrahim said that it must now pay significantly more than this amount into the country’s coffers.

Ibrahim said: ‘It’s a cost to the image of the country, it’s a cost to investments and now it’s a burden shouldered by the government because of the complicity of so many of these so-called credible, renowned financial institutions.

‘For them to use a country like Malaysia, which is struggling to reform itself economically, moving up the ladder, is disgusting.’

The bank could also face a fine in America of more than £900m.

And Abu Dhabi’s sovereign wealth fund is suing the bank, claiming it lost money because of the saga.

Goldman shares have dropped sharply amid the fallout from 1MDB, the biggest scandal to hit the bank since the financial crisis.

The stock hit an all-time high in March but is down around 30pc since then, wiping more than £23bn off its value.

Two bankers, Tim Leissner and Roger Ng, have been indicted by the US Department of Justice over allegations they bribed Malaysian state officials so the bank could win business.

Leissner pleaded guilty earlier this month, telling prosecutors that getting around the firm’s legal department to win more business – ‘to conceal facts from certain compliance and legal employees’ – was in line with the culture at Goldman Sachs.

Meanwhile, Goldman has been fined £5.2m by South Korean authorities for carrying out a banned type of short-selling – betting that share prices will fall.

It is not the first time that Goldman has been accused of sharp practice. The firm was fined £4bn in 2016 for mis-selling worthless mortgages before the financial crisis.

And in 2009, as the world was gripped by a financial downturn caused by the banks, Blankfein infamously said he was ‘doing God’s work’.

Goldman Sachs declined to comment last night.