Trump’s closure of DOJ could stall 1MDB probe

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Reports that US President Donald Trump administration’s Department of Justice (DOJ) shut down its elite anti-corruption unit have raised concerns about the future of global financial crime enforcement, particularly in cases like Malaysia’s 1MDB scandal. The unit played a key role in investigating the multibn-dollar fraud, which implicated top officials, global banks, and Hollywood elites.

Trump ties to 1MDB scandal

The Trump administration’s handling of the 1MDB case came under scrutiny due to several high-profile connections. Elliott Broidy, a former top fundraiser for President Trump, was charged with running an illegal lobbying campaign on behalf of Malaysian financier Jho Low. The campaign aimed to persuade the US government to drop its investigation into 1MDB. Broidy pleaded guilty but was later pardoned by Trump.

Additionally, in 2017, then-Malaysian Prime Minister Najib Razak visited the White House and met with Trump. Despite the ongoing DOJ investigation into 1MDB, both leaders focused on Malaysia’s investments in the US rather than discussing the scandal.

Legal consequences: Swiss court delivers major verdicts

Meanwhile, international efforts to hold key players accountable continue. In August 2024, Switzerland’s central criminal court sentenced former PetroSaudi CEO Tarek Obaid and his associate Patrick Mahony for embezzling more than USD 1.8bn from 1MDB. They were also convicted on nearly 600 counts of money laundering, having facilitated the movement of more than USD 12bn in illicit funds on behalf of Jho Low and others.

The court in Bellinzona found that Obaid and Mahony orchestrated three major thefts between 2009 and 2011, using PetroSaudi as a front to siphon money from 1MDB. Prosecutors revealed how they misled officials into believing they were entering a legitimate joint venture, even staging a meeting on the luxury yacht Alfa Nero to lend credibility to their scheme.

Obaid was sentenced to seven years in prison, and Mahony to six years. However, under Swiss law, their sentences will not take effect until all appeals are exhausted. Obaid’s lawyer, Daniel Zappelli, has vowed to seek a full acquittal.

A global fraud operation

Jho Low, the scandal’s alleged mastermind, remains a fugitive. He was a close confidant of Najib Razak, who was sentenced to prison in 2020 for his role in the fraud. Prosecutors detailed how stolen 1MDB funds financed lavish lifestyles, including purchases of luxury properties in London and Geneva, private jets, high-end yachts, and rare gemstones.

“This was the scam of the century,” Swiss lead prosecutor Alice de Chambrier told the court, calling the defendants “calculative, manipulative, and obscenely greedy.”

Political fallout

The 1MDB scandal, one of the largest financial frauds in history, exposed deep corruption in Malaysia and sent shockwaves through global financial institutions. Established in 2009 as a Malaysian sovereign wealth fund, 1MDB was meant to drive economic growth but instead became a vehicle for embezzlement.

In 2015, leaked documents revealed that Najib Razak had received USD 700mn from 1MDB into his personal accounts. Jho Low orchestrated the movement of these funds through offshore accounts and shell companies, eventually siphoning over USD 4.5bn from the fund by 2018.

The scandal led to a political crisis in Malaysia. Najib’s government dismissed critics, but former Prime Minister Mahathir Mohamad spearheaded efforts to hold him accountable. The 2018 general election saw Mahathir return to power, reopening investigations and barring Najib and his allies from leaving the country.

International investigations and recoveries

At least six countries launched investigations into 1MDB’s illicit financial dealings. By 2015, the fund had amassed USD 11.73bn in debt, worsened by a controversial USD 3bn bond issue arranged by Goldman Sachs, which received USD 300mn in fees. The investment bank later faced charges under the US Foreign Corrupt Practices Act, agreeing to a USD 2.9bn settlement.

Others implicated included rapper Pras Michel, former Goldman Sachs executive Tim Leissner, and Elliott Broidy. The US has recovered and returned USD 1.2bn to Malaysia, while Singapore and other jurisdictions have repatriated smaller amounts. As of 2021, Malaysia assumed USD 7.8bn in outstanding debts linked to 1MDB.

Malaysia welcomes Swiss court verdict

Malaysia’s 1MDB board welcomed the Swiss court’s ruling. “This verdict ensures that Patrick Mahony and Tarek Obaid will face justice for their role in defrauding the people of Malaysia,” the board said in a statement.

The Swiss ruling marks a milestone in the global effort to recover bn lost in the scandal, which implicated financial institutions, politicians, and celebrities. However, with Jho Low still at large, and legal appeals ongoing, the 1MDB saga remains far from over.