ZURICH/SINGAPORE – Swiss prosecutors have asked Malaysian authorities for a second time to help gather evidence in a case against those accused of embezzling funds from 1Malaysia Development Bhd. after an initial request in January went unanswered.
Some US$800 million (S$1.1 billion) in natural-resource investments from a Malaysian sovereign fund known as SRC appears to have been misappropriated, hidden in part through the creation of a Ponzi scheme, the Swiss Attorney-General’s office said on Wednesday (Oct 5) in a statement on its website.
In a Ponzi scheme, returns on initial investments are paid from funds obtained from subsequent investors rather than from legitimate revenue from the investments.
In a Ponzi scheme, returns on initial investments are paid from funds obtained from subsequent investors rather than from legitimate revenue from the investments.
SRC International, a company that was linked to debt-ridden state investment company 1MDB, is now controlled by the Malaysian finance ministry.
Without elaborating, the Swiss AG’s office said that at this stage of the criminal proceedings, “four persons and one bank” are under investigation” in connection with the Malaysian sovereign funds 1MDB and SRC.
Swiss, Singaporean and United States prosecutors are digging into how more than US$3.5 billion was diverted from 1MDB, which was intended to finance development projects across Malaysia. US prosecutors filed a request in July in California court to seize more than US$1 billion in real estate, art and other luxury goods bought with allegedly stolen money.
The Swiss AG’s office said it had received evidence from Singaporean authorities, to its “full satisfaction”, in response to a request in April. However, its January request for help from the Malaysians is still pending.
Malaysia’s AG’s office did not immediately respond to an e-mail seeking comment, while a spokeswoman at the country’s Ministry of Finance said she could not immediately comment on the issue. 1MDB referred requests for comment to the attorney general’s office.
Swiss AG Michael Lauber was in Singapore on Wednesday to give a lecture at the inaugural AG’s lecture held at the Marina Bay Sands. The lecture series is meant for thought leaders in law and other related disciplines to share their experiences and insights with the Singapore legal community.
In his speech, Mr Lauber spoke about Switzerland’s approach to combating white-collar crime. Among the cases he brought up was the 1MDB probe. He noted that the investigations have “huge political implications”. “Nevertheless, we are as prosecutors obliged by law to investigate and combat abuse of the integrity of our financial place,” he said.
He added that his office started looking into the matter about a year ago after several reports from Swiss banks. The analysis of the data directed its investigations to detect alleged embezzlement of 1MDB funds. He added: “The analysis of all the financial documents brought up serious suspicion of the possible implication of Swiss banks in these alleged criminal activities and of an abuse of our financial place to deceive legitimate Malaysian sovereign funds”.
Referring to the latest development, Mr Lauber said the investigation showed that “a form of Ponzi scheme may have been used to deceive 1MDB and SRC on the value of their investments”.
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