1MDB scandal unfolds: Swiss court pursues embezzlement allegations

Former Malaysia prime minister Najib Razak (right) leaves the Federal Court in Putrajaya, Malaysia, August 18, 2022. KEYSTONE

Commencing next Tuesday, the Federal Criminal Court in Bellinzona, situated in canton Ticino, will undertake proceedings concerning the Swiss aspect of the controversy surrounding the Malaysian state fund 1MDB.

A businessman and his associate stand accused of mismanagement, fraud, money laundering, and various other offences. It is alleged that they siphoned funds from the fund for personal gain.

The men are accused by the Swiss Attorney General of creating a system used to siphon off funds. Former Malaysian Prime Minister Najib Razak and his advisor Jho Low were involved. The extent of the embezzlement is said to have ultimately totalled around $4.5 billion (CHF4 billion), of which $1.8 billion is said to have flowed into the accounts of the two defendants.

+Swiss indict two managers of Saudi oil company in 1MDB scandal

The businessman, a 48-year-old Swiss-Saudi dual citizen, is accused of mismanagement, bribery of foreign public officials, forgery of documents, qualified money laundering and misconduct in public office. His 46-year-old partner holds a Swiss and a British passport and is facing the same charges, with the exception of forgery.

False state company

According to the indictment, the initial defendant is purported to have orchestrated the transfer of $1.8 billion from the state fund 1MDB to the accounts of his Geneva-based company, PetroSaudi, spanning from 2009 to 2011. Through a collaborative effort between the two defendants and other accomplices, the fund’s board of directors was led to believe they were engaging with a Saudi Arabian state-owned enterprise involved in oil field exploration and development.

Contrary to this narrative, PetroSaudi and its affiliated companies in the Cayman Islands and Turkmenistan were essentially empty shell entities. Employing a sophisticated network of deceit and partial truths, the defendants allegedly persuaded the fund’s board that PetroSaudi possessed licenses for oil fields in Turkmenistan and Argentina.

+The role of Swiss banks in the 1MDB scandal

To engage in the exploitation of these resources, the 1MDB fund was convinced to form a joint venture with PetroSaudi. While the fund contributed genuine deposits, the Geneva-based company’s contributions were comprised of fictitious rights.

Initially, by the close of 2009, the fund saw a reduction of $1 billion. Out of this sum, $700 million was directed to an account held by Jho Low, with $300 million allocated to PetroSaudi and consequently to the two defendants.

Hefty restructuring

In a second step, a restructuring of the joint venture in 2010 led to further payments: $500 million for the joint venture – and, according to the BA, in reality for the defendants – and $330 million for Jho Low. 

The 1MDB scandal has led to the initiation of proceedings in several countries. In Malaysia, it triggered the fall of Najib Razak’s government in 2018. In July 2020, he was sentenced to twelve years in prison and fined 210 million ringgit (CHF44 million). At the beginning of February 2024, the Malaysian Board of Pardons and Paroles reduced the sentence to six years.

The trial is scheduled for the month of April. The Swiss Attorney General will announce the required sentence at the main hearing.

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Adapted from German by DeepL/amva

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