On a Wednesday, the filing quietly arrived in a federal courtroom in Manhattan. It is the type of document that attorneys quietly place on the docket. $500 million. After years of litigation related to the 1MDB scandal, Goldman Sachs has now agreed to pay a group of shareholders led by Sweden’s Sjunde AP-Fonden pension fund. The lawyers for the plaintiffs referred to it as “an outstanding result.” In private, a number of individuals who have been following this case for more than ten years are referring to it as something different. a reduction.
The skepticism has a cause. Internal damage estimates from plaintiff-side experts had been closer to $2.5 billion earlier in the litigation, which is about five times the final amount. It remains to be seen if that math was ever feasible. However, it provides insight into the discrepancy between what investors thought they lost and what they are currently receiving. Seldom do settlements satisfy the original complainants. It appears that this one is no different.
Even though the backstory is now well-known, its peculiarity never quite goes away. 1MDB was established as a sovereign development fund by Malaysia’s prime minister at the time, Najib Razak. Its de facto fixer was Jho Low, a young financier with a penchant for Hollywood parties and Manhattan penthouses. Between them, about $4.5 billion was embezzled and dispersed among superyachts, Bel Air mansions, shell corporations, and, at one point, an interest in the movie The Wolf of Wall Street. That final detail still strikes me as ironic.
Goldman served as the underwriter. In 2012 and 2013, the bank assisted 1MDB in selling $6.5 billion in bonds and received about $600 million in fees—an exceptionally large payout for such sovereign work. Later, the company’s compliance officers claimed to have voiced concerns. Subsequent prosecutions claim that those worries were ignored. Tim Leissner, a banker, entered a guilty plea. Roger Ng, another, was found guilty. Jho Low is still at large. Najib is incarcerated in Malaysia.
The allegations made by shareholders—which this settlement now puts an end to—were less serious than fraud against Malaysians. They were the victims of fraud. They contended that while Goldman privately enabled and profited from one of the biggest financial scandals in modern history, it publicly insisted on its world-class risk management. The stock dropped when the truth came to light. They desired to be restored to wholeness.
As this develops, it seems as though the legal system has done its best and is now wrapping up. In 2020, Goldman paid US and international regulators $2.9 billion. A unit from Malaysia entered a guilty plea. In May 2024, a Brooklyn judge formally closed the criminal case, ending the deferred prosecution agreement. In actuality, the $500 million for shareholders is the final bill. or nearly so.
These settlements have become so commonplace that it is difficult to ignore them. A bank makes a mistake, pays a sum that seems huge to outsiders but reasonable to insiders, and then moves on. The market value of Goldman is significantly more than $200 billion. A trader at the desk might half-jokingly refer to 500 million as a rounding error. The attorneys for the shareholders are aware of this. They made a diplomatic public statement. The court filing is not so much triumphant as it is measured.
The agreement still needs to be approved by a judge, which is essentially a formality at this point. Goldman remained silent. There is only an acknowledgement that paying half a billion dollars is less expensive than fighting; there is no acknowledgement of any wrongdoing. In a sense, that computation reveals everything about Wall Street’s current perspective on accountability. The next scandal might already be making its way through someone’s compliance queue and receiving the same shrug. Usually, it is.
