Goldman Sachs and the 1MDB Scandal
The 1MDB scandal is a scandal of epic proportions that was uncovered in Malaysia almost five years ago. This scandal has led to a lot of consequences in Malaysia. For instance, this was the main reason behind the sudden downfall of the previous Malaysian Prime Minister Najib Razaks government. The main accused, Jho Low, who is supposedly an accomplice of Najib Razak, is also on the run.
However, till about last month, the people of the United States did not have the remotest idea about the 1MDB scandal. All of a sudden, this scandal has gained prominence as it threatens to bring down Goldman Sachs, one of the stalwarts of the American banking industry.
In this article, we will have a closer look at what the 1MDB scandal is and how it has affected Goldman Sachs.
What is the 1MDB Scandal?
1 Malaysia Development Bhd was a fund that was created by the Malaysian government under the leadership of Najib Razak. The main purpose of this fund was to build better infrastructure in Malaysia and thereby improve its economy. The Malaysian government had raised close to $6.5 billion from various investors for this purpose.
However, vast sums of money were embezzled from this fund. The fund ended up making some questionable investments which include producing movies like The Wolf of Wall Street. The fund also brought strange assets like paintings. However, the scandal really isnt about the nature of the assets that were brought using the proceeds of the fund. The real issue is that about $3.5 billion, i.e. close to 50% of the fund has been embezzled. As a result, the Malaysian government now finds itself liable to make payments on debt whose proceeds were swindled away.
Obviously, this is a big loss to the government as well as to the people of Malaysia. This is the reason why the new Malaysian government is taking every measure possible to recover the debts. These strict measures include the prosecution of Goldman Sachs.
Why is Goldman Sachs Being Held Responsible for the Scandal?
Goldman Sachs has been an enabler to the 1MDB scam in many ways.
How does the 1MDB Scandal Affect Goldman Sachs?
The 1MDB scandal has had a huge impact on the financial position of Goldman Sachs. Some points have been listed below:
To sum it up, a big scandal in a small country has brought the goliath of the finance world to its knees. Hopefully, this scandal and the consequences will prevent Goldman Sachs from engaging in unethical behaviour in the future.
Authorship/Referencing - About the Author(s)
The article is Written By Prachi Juneja and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.