1MDB scandal allegedly involves Ponzi scheme

A construction worker talks on the phone in front of a 1Malaysia Development Berhad (1MDB) billboard at the Tun Razak Exchange development in Kuala Lumpur.
A construction worker talks on the phone in front of a 1Malaysia Development Berhad (1MDB) billboard at the Tun Razak Exchange development in Kuala Lumpur.PHOTO: REUTERS

GENEVA • Switzerland said yesterday that it had widened its probe into Malaysia's scandal-tainted state investment fund, 1MDB, with transactions worth US$800 million (S$1.1 billion) under scrutiny and evidence pointing to fraud through "a Ponzi scheme".

The Swiss Attorney-General opened a probe into 1Malaysia Development Berhad (1MDB) in August last year, following allegations that some of the money allegedly stolen from the fund had passed through Swiss banks.

Citing new evidence, the Attorney-General's Office said it had "identified further suspect transactions involving the Swiss financial sector". "The sum of US$800 million appears to have been misappropriated," it added.

It said probes showed 1MDB assets had passed through SRC International, a Malaysian firm linked to 1MDB now controlled by the Malaysian Finance Ministry, in fraudulent transactions "based on a form of 'Ponzi' scheme".

Swiss Attorney-General Mich- ael Lauber, who was in Singapore for yesterday's inaugural Attorney- General's lecture, reiterated the allegations in his speech at Marina Bay Sands.

He said Swiss banks were also suspected of being implicated. "These investigations have huge political implications," he admitted. " Nevertheless, we as prosecutors are obliged by law to investigate and combat abuse of the integrity of our financial place."

1MDB, once a pet project of Prime Minister Najib Razak who chaired its advisory board, is the subject of money-laundering probes in at least six countries. He has denied any wrongdoing and said Malaysia will cooperate with the international investigations.

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.

The Swiss Attorney-General's Office said yesterday it is satisfied with the evidence it received from the Singaporean authorities.

AGENCE FRANCE-PRESSE, REUTERS, BLOOMBERG

•Additional reporting by K. C. Vijayan

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A version of this article appeared in the print edition of The Straits Times on October 06, 2016, with the headline '1MDB scandal allegedly involves Ponzi scheme'. Print Edition | Subscribe