Goldman Sachs Settles 1MDB Lawsuit for $500 Million

• Goldman Sachs helped 1MDB sell $6.5 billion in bonds and collected approximately $600 million in fees, while authorities say $4.5 billion was siphoned from the fund
• The bank previously settled criminal probes in 2020 for $2.9 billion with a Malaysian unit admitting wrongdoing, completing a deferred prosecution agreement in May 2024
• Two Goldman bankers faced criminal consequences: one was convicted of helping loot 1MDB and another pleaded guilty

Goldman Sachs Settles 1MDB Lawsuit for $500 Million

Goldman Sachs has agreed to pay $500 million to settle a class action lawsuit related to its role in the 1Malaysia Development Berhad (1MDB) corruption scandal. The settlement, announced May 21, requires judicial approval and resolves claims that the investment bank defrauded investors in connection with bond offerings for the Malaysian sovereign wealth fund.

Key Background:

Former Malaysian Prime Minister Najib Razak established 1MDB to promote economic development with assistance from financier Jho Low, now a fugitive. U.S. and Malaysian authorities determined that $4.5 billion was misappropriated from the fund, with proceeds diverted to offshore accounts and shell companies linked to Low.

Goldman's Involvement:

The bank helped 1MDB sell $6.5 billion in bonds and collected approximately $600 million in fees from these transactions. Plaintiffs' lawyers described the settlement as "an outstanding result for the class."

Previous Penalties:

This settlement adds to Goldman's substantial 1MDB-related costs. In 2020, the bank agreed to pay $2.9 billion in penalties to the U.S. Justice Department and other authorities, with a Malaysian subsidiary admitting criminal wrongdoing. A Brooklyn judge formally ended the U.S. criminal case against Goldman in May 2024 after the bank completed a three-year deferred prosecution agreement. Two Goldman bankers faced individual consequences, with one convicted of helping loot 1MDB and another pleading guilty.

Market Implications:

The settlement represents another significant financial and reputational cost for Goldman Sachs stemming from one of the world's largest financial scandals, though it allows the bank to further distance itself from the controversy.