KUALA LUMPUR (BLOOMBERG) - Malaysian investigators have uncovered details of how fugitive financier Low Taek Jho could have made financial gains from the entity that predated scandal-plagued state fund 1Malaysia Development Berhad (1MDB), through a bond sale involving local bankers and a Thai brokerage.
The authorities are probing a RM5 billion (S$1.64 billion) bond sale in 2009 by Terengganu Investment Authority, or TIA, a sovereign wealth fund that later became 1MDB, according to people familiar with the matter.
Investigators believe that US$126 million (S$171.41 million) of illicit funds - which Low and his associate Eric Tan have been charged with receiving - came from the deal arranged by AMMB Holdings and involving companies in Thailand and Singapore, said one of the people.
The investigation is focused on tracing money flows that led to Low - better known as Jho Low - as well as officers at TIA and AMMB, who may have abetted Low in the dealings, according to the people.
The authorities are looking into whether any individuals concealed or misrepresented statements related to the bond sale and whether any of the funds were misappropriated, the people said, asking not to be named discussing an ongoing probe.
Low, who remains at large, has been named by US prosecutors as the alleged mastermind of a US$4.3 billion scheme to siphon money from 1MDB - putting him at the centre of a massive scandal that has ensnared Goldman Sachs Group and spawned investigations on three continents.
Low has repeatedly denied wrongdoing, and said he held no formal position at 1MDB.
Malaysian authorities are probing whether Low and Tan benefited from a complex series of transactions that involved bonds issued by TIA changing hands twice on the same day at vastly different prices, the people said.
A spokesman for the Finance Ministry, which now oversees 1MDB, declined to comment.
The Securities Commission is conducting inquiries into matters relating to 1MDB, including the TIA bond issuance, a spokesman said in response to a Bloomberg query.
The regulator has the authority to enforce securities rules on institutions or individuals if there's any wrongdoing.
Representatives for Ambank, Low and the Malaysian Anti-Corruption Commission couldn't immediately comment on the matter.
A spokesman for the police declined to comment. Previous efforts to reach Tan were unsuccessful.
The series of transactions in 2009 may have started with TIA reaching out to Ambank to help it raise RM5 billion, the people said.
Ambank then sold RM3.8 billion of the TIA notes to Country Group Securities Pcl in Thailand, and RM700 million to a Singapore-based company, while buying RM500 million for itself, the people said.
The three parties bought these notes at a discounted price of about RM87 for 100, on account of the notes being the first 30-year Islamic notes out of Malaysia.
Investigators got suspicious when documents they obtained showed that the parties resold the bonds for profit on the same day. Ambank helped them sell the notes for RM100 to RM105 to local investors, according to the people.
Low served as an adviser to TIA at the time and was involved in the discussions on the bond issuance from the start, the people said.
That the transactions were done within 24 hours has raised many questions for investigators who are probing why Ambank didn't arrange for the bonds to be sold directly to the investors, and how Country Group - a new name in the 1MDB investigations - came into the picture. It's unclear if any new charges will be filed related to the transactions.
Mr Veeraphat Phetcharakupt, chief executive officer of Country Group, couldn't immediately comment.
Thailand's Securities and Exchange Commission hasn't been contacted about any investigation involving 1MDB, said secretary-general Rapee Sucharitakul.
As for how the money may have gotten to Low, investigators uncovered a put option agreement that Country Group signed with Singapore-based ACME Time Ltd, whose beneficiaries are Low and Tan.
That agreement paved the way for Country Group to send a third-party transfer instruction to Ambank to pay US$113 million of the windfall, generated by reselling the TIA notes, to ACME Time, one of the people said.
Malaysian prosecutors have leveled multiple charges against Low and Tan in their absence, including allegations of receiving US$113.4 million of illicit funds through ACME Time from an Ambank account in May 2009, followed by another US$12.6 million in July 2009, according to charge sheets issued in December.
The charge sheets didn't link the illicit payments to TIA's bond sale.
Former Malaysian prime minister Najib Razak, who has pleaded not guilty to dozens of charges linked to 1MDB, has said that Low never worked for or represented 1MDB, and instead Low was a representative of "Arab parties". Low said he was never employed by the governments of Malaysia or Abu Dhabi.