Is this Malaysia’s biggest fraud case ever?

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TEG’s publisher Andy Davison shares his view on the current status of the 1MDB saga.

1MDB has been the subject of numerous articles by local and international media for many months. Nearly all the stories cast a negative image on Malaysia. It has been a slow and rather tortuous journey trying to uncover what really happened. It was made more difficult by the rather complex financial transactions which most people cannot understand, the sluggish pace of the investigation, and the apparent misleading comments coming from some quarters.

Menara IMC, where the 1MDB office is located | Photo from
Menara IMC, where the 1MDB office is located | Photo from

The recent admission by the current president of 1MDB, Arul Kanda, that there may well be a massive fraud with the complicity of 1MDB staff is a major turnaround from his previous assurances that nothing was missing and it was ‘simply’ a case of poor governance and decision-making.

Various international media have reported that 1MDB made substantial payments to companies not related to their business partners. This was recently confirmed by 1MDB’s Abu Dhabi partner, International Petroleum Investment Company (IPIC) when they said a company to which 1MDB paid US$3.5 billion was unrelated to them. The fact the ‘fake’ company had a name similar to a genuine subsidiary of IPIC suggests fraudulent intent.

The recently released Parliamentary Accounting Committee report stated that they were unable to validate several payments totaling billions of dollars, which should certainly have sounded alarm bells.

Apparently, two former executives of IPIC have been detained by the Emirate authorities and it seems this is, at least in part, related to the partnership with 1MDB.

malaysian flag

The erroneous payment appears to be linked to the recent dispute between IPIC and 1MDB over who should pay US$50 million of interest due on a bond. IPIC claims 1MDB are in default of their agreement by failing to settle a US$1 billion loan payment. 1MDB claims it was paid, although it now seems it went to the ‘fake’ company.

Refusing to pay the interest and going into default has ramifications for Malaysia’s financial markets, although it is not expected to result in their credit rating changing.

The Central Bank seems confident that the eventual losses will not have a serious negative impact on Malaysia’s economic growth. It remains to be seen what impact the continuous negative coverage in the international media has on the country, but it certainly isn’t helping its image around the world.


One thing appears certain and that is a lot of money has disappeared and the priority would seem to be finding out what happened and trying to recover some of the money. On reading the local press, one sees little coverage of this matter, whereas one would have expected it to be headline news.

The poor management of 1MDB, and possible fraud, has already cost taxpayers in Malaysia a lot of money and it seems entirely possible the eventual cost, if a massive fraud did indeed occur, will be far more costly and could go down in history as Malaysia’s biggest fraud case ever.

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