Nikkei Asian Review
October 5, 2016
BANGKOK — Switzerland’s Office of the Attorney General, looking into allegations that a Malaysian state investment fund was involved in money laundering, said Wednesday it has determined that a Ponzi scheme was used to misappropriate $800 million from the fund and requested further information from authorities in Malaysia.
As part of the Swiss criminal investigation into 1Malaysia Developer Berhad that began in August 2015, the Attorney General’s office said it had uncovered a “Ponzi scheme fraud” that it said was used to launder $800 million belonging to SRC International, a former 1MDB subsidiary.
Ponzi schemes involve paying returns to initial investors from sources other than income generated from the investments, often the funds of those who invest later.
The Attorney General’s office said its initial request in January for legal assistance from the Malaysian authorities to examine funds passing through Swiss financial institutions is still pending.
The latest request is aimed at corroborating new findings so that the “presumed companies or persons suffering harm can assert their rights in the Swiss criminal proceedings,” the office said in a press release.
Four people, including two former officials of the United Arab Emirates and a bank, have been investigated so far, in relation to the alleged misappropriation of funds in 1MDB. The Swiss said the funds were originally meant for a joint-venture investment in PetroSaudi International and the purchase of assets that belonged to Malaysian gaming group Genting and Tanjong Energy.
In addition to the Swiss, authorities in Singapore and the U.S. are probing 1MDB, a sovereign wealth fund set up by Malaysian Prime Minister Najib Razak in 2009 to invest in development projects. Following several technical default on debts, the fund was reduced to a shell company. All its assets have been transferred to the Malaysian Finance Ministry in June.
In July, the U.S. Department of Justice filed a lawsuit to recover over $1 billion it says was stolen from 1MDB and used for lavish spending in the country, including the purchase of luxury apartments and artworks.
The Swiss OAG said it is confident that Malaysia will respond to the two requests, adding that authorities in Singapore have already cooperated on a similar request for evidence.