Goldman Sachs to Pay $500M in 1MDB Shareholder Fraud Settlement

Goldman Sachs has agreed to pay $500 million to settle a major class action lawsuit tied to the 1MDB corruption scandal, marking another costly chapter in one of the biggest financial controversies involving the Wall Street giant. The settlement resolves claims that Goldman Sachs misled shareholders about its role in helping Malaysia’s sovereign wealth fund, 1MDB, raise billions through bond sales.

The lawsuit was led by Swedish pension fund Sjunde AP-Fonden, representing investors who accused Goldman Sachs of hiding the risks and misconduct connected to the 1MDB scandal. Court documents filed in Manhattan federal court revealed the settlement amount after both parties confirmed last month that an agreement had been reached.

Plaintiffs argued that Goldman Sachs falsely promoted its strong risk management practices while allegedly benefiting from fraudulent activities linked to 1MDB. Investors claimed the bank’s stock price suffered significant losses once the market realized Goldman had profited heavily from the controversial deals.

The 1MDB scandal dates back to former Malaysian Prime Minister Najib Razak’s efforts to create the state investment fund for economic development. Authorities in the United States and Malaysia later alleged that approximately $4.5 billion was misappropriated from the fund. Fugitive financier Jho Low was identified as a central figure in the scheme, with funds reportedly routed through offshore accounts and shell companies.

Goldman Sachs helped arrange $6.5 billion in bond offerings for 1MDB and reportedly earned around $600 million in fees from the transactions. In 2020, the bank agreed to pay $2.9 billion in global penalties to resolve investigations conducted by the U.S. Department of Justice and other regulators. Goldman also admitted criminal wrongdoing through its Malaysian subsidiary.

The U.S. criminal case officially ended in May 2024 after Goldman completed a deferred prosecution agreement. Several former Goldman bankers were also implicated, with one convicted and another pleading guilty for their roles in the 1MDB fraud scandal.