Back in August, it became readily apparent that the scandal surrounding Malaysia’s 1MDB threatened the political career and even the legacy of the country’s Prime Minister Najib Razak.
Street protests in Kuala Lumpur emboldened by loud calls from highly influential former PM Mahathir Mohamad suggested that, much like Brazil and Turkey, Malaysia is yet another example of an emerging economy wherein deteriorating fundamentals are set to conspire with idiosyncratic political risks to create the conditions for a descent into full-on crisis.
As a reminder, the development bank at the heart of the scandal benefited from early financing provided by Goldman, which used its connections with the PM to help secure deals that saw the bank effectively write 1MDB several large checks while simultaneously taking newly-issued debt onto its own books at a discount to par.
The outsized underwriting ‘fees’ have been the subject of some debate, but the real questions revolve around how some $700 million ended up in personal bank accounts linked to Najib.
The premier’s government has been variously accused of obstructing domestic investigations into 1MDB and now, the FBI is not only looking into the fund, but also into Goldman’s role in the financing, while authorities in Switzerland are asking their own questions.
Meanwhile, the UAE has begun to look for billions in collateral payments that a subsidiary of an Abu Dhabi wealth fund supposedly received from 1MDB but which have apparently disappeared.
In short, it looks as though this was nothing more than a slush fund that everyone was dipping into and now, the whole thing is about to unravel.
This post was published at Zero Hedge on 10/18/2015 –.
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