Misappropriated Malaysian government funds were diverted into the $2.2bn purchase of a US energy company with assets in Southeast Asia, according to US prosecutors investigating flows of money linked to troubled state investment fund 1MDB.
The US Department of Justice said that funds laundered through the sale of an interest in New York’s Park Lane Hotel were invested into Coastal Energy, a company headquartered in Houston.
Last July, US prosecutors moved to seize $1bn in assets as part of a sprawling anti-money-laundering investigation into the scandal-hit 1MDB, a fund set up by Najib Razak, Malaysia’s prime minister.
Regulators around the world have probed transactions linked to the fund, with US authorities alleging more than $3.5bn was misappropriated by high-ranking officials at 1MDB and their associates.
The US justice department alleges that Jho Low, a Malaysian businessman who held no formal role with the fund, played a central role in diverting money.
US prosecutors said this month that Mr Low used laundered funds, whose original source was 1MDB, to invest in Coastal.
Coastal, which was listed in Toronto and on London’s Aim at the time of the deal in November 2013, has oil and gas assets in Thailand and Malaysia. It has since been delisted.
Mr Low and his father Larry invested $50m of allegedly misappropriated funds through an entity called Strategic Resources Global, according to the US lawsuit.
Cepsa, a Spanish oil and gas company wholly owned by Abu Dhabi’s sovereign wealth fund Ipic, invested the rest of the capital, US prosecutors say.
Roughly a week after the Lows’ investment, their entity SRG received $350m from Cepsa.
“The commercial basis for this nearly immediate 600 per cent return on investment is not immediately apparent,” the US prosecutors state.
Police in Abu Dhabi last year arrested Khadem al-Qubaisi, who headed Ipic until April 2015
Mr Qubaisi is alleged by US authorities to have received almost $473m of funds diverted from 1MDB into his bank accounts.
Mr Qubaisi, once one of Abu Dhabi’s most high-profile business figures, was Cepsa’s chairman at the time.
Citigroup and Credit Suisse acted as advisers to Coastal Energy on the deal, while Goldman Sachs acted as financial adviser for Cepsa. PwC was an adviser to both Cepsa and SRG.
Mr Low and his family have previously denied any wrongdoing. 1MDB has denied wrongdoing, as has the Malaysian premier.
Goldman Sachs said in a statement that neither Mr Low nor any company controlled by him was a Goldman client in the Coastal deal.
“Prior to reading the government filing, Goldman was not aware of, and had no involvement in, any transaction in which SRG sold its stake in a joint venture back to Cepsa,” the statement said.
The funds invested by the Low family were traced by US prosecutors to a 2013 bond sale by 1MDB. This bond offering, along with two other bond sales for 1MDB in 2012, was arranged by Goldman.
Ipic declined to comment. PwC did not immediately respond to a request for comment.
US authorities this month also moved to seize a London penthouse, office and flat bought with £77m in funds allegedly diverted from 1MDB. The properties, on Stratton Street in Mayfair, were acquired by Mr Low, the US DoJ says.
– https://www.ft.com
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