The lead counsel representing ousted premier Najib Razak in his 1Malaysia Development Berhad (1MDB) legal battle has been charged with money laundering.
Investigators allege Muhammad Shafee Abdullah received RM9.5 million (S$3.14 million), believed to be proceeds from illegal activities.
He is accused of acquiring the sum in two tranches, in September 2013 and February 2014, from a bank account belonging to Najib.
This comes as a blow for the former prime minister, who is battling charges of criminal breach of trust, money laundering and abuse of power at a former subsidiary of the troubled state fund. Shafee may have to quit representing Najib to avoid any conflict of interest.
Following Pakatan Harapan's victory in May, Malaysia has reopened the probes into 1MDB and Najib's involvement in its operations.
The United States Department of Justice has alleged that more than US$4.5 billion (S$6.1 billion) was misappropriated from 1MDB and about US$700 million of that ended up in Najib's personal bank accounts. Najib has consistently denied any wrongdoing.
Shafee is also charged with violating the Income Tax Act 1967 by omitting the income received from Najib in statements made to the Inland Revenue Board.
He pleaded not guilty to all four charges and bail was set at RM1 million with two sureties.
Last week, the Attorney-General's Chambers issued an affidavit claiming Shafee had received payments amounting to RM9.5 million from Najib between 2013 and 2014.
Claims have arisen that the payments were made to prosecute Malaysian politician Anwar Ibrahim in the second sodomy case.
Shafee denied the allegations, saying the payments were for legal services done for Umno and Barisan Nasional, and as a loan for property purchase. "The money was given to me as an advance or loan, until I rationalised the billing," he said yesterday. Once the rationalisation was done, he said, it would be reflected in his tax returns.
Najib said the charges against his lawyer are "yet another step to deny a fair trial".
He added: "No one will be safe if the government chooses to victimise or politically persecute you."