There’s a certain kind of reckoning that comes slowly, almost courteously, dressed in legalese and court documents. In a Manhattan federal court document, attorneys for a group of Goldman Sachs shareholders revealed last Wednesday that the bank would pay $500 million to resolve a class-action lawsuit related to Malaysia’s 1MDB corruption scandal. The quantity is substantial enough to garner media attention. It’s another matter entirely whether it truly makes a difference.
The lawsuit, which was first filed in 2018, charged Goldman with deceiving its own investors regarding the bank’s involvement in 1MDB, a Malaysian sovereign wealth fund that was founded to promote national economic development but turned out to be one of the most daring financial scams in contemporary history. Authorities in the United States and Malaysia eventually came to the conclusion that approximately $4.5 billion had been embezzled through shell corporations and offshore accounts associated with fugitive financier Jho Low. The funds were reportedly used to finance portions of the film industry as well as luxury real estate and yacht purchases. It’s the kind of expenditure that, until you realize whose money it was, seems almost comical.
Goldman’s influence was evident in every aspect of the fundraising process. Between 2012 and 2013, the bank collected about $600 million in fees while assisting 1MDB in raising $6.5 billion through bond sales. It probably felt like a big victory on the inside at the time. In retrospect, those fees amount to some of the most costly profits in the company’s recent history. Goldman was accused by shareholders of actively hiding its involvement while claiming to have a strict and disciplined risk management culture. The lawsuit spent years attempting to establish the difference between those two realities.
The plaintiffs, led by the Swedish pension fund Sjunde AP-Fonden, contended that the decline in Goldman’s stock price was specifically caused by the market’s eventual realization of the bank’s actions. Compared to cash theft, that type of damage is more difficult to measure, but it does exist. Institutional investors, retirement funds, and regular shareholders all experienced it. When the plaintiffs’ attorneys referred to Wednesday’s settlement as “an outstanding result for the class,” they likely meant some real relief.
It’s important to acknowledge that this isn’t Goldman’s first payment associated with 1MDB. The bank consented to pay $2.9 billion to Singaporean, British, and Hong Kong regulators as well as the U.S. Department of Justice in 2020. Its Malaysian subsidiary acknowledged engaging in criminal activity.
The bank made a separate $3.9 billion payment to the Malaysian government. It recovered $174 million from executives, both past and present. In the end, Tim Leissner and Roger Ng, two bankers, received prison sentences. In May 2024, a Brooklyn court officially closed Goldman’s criminal case following the bank’s completion of a three-year deferred prosecution agreement. The $500 million on Wednesday pushes the overall financial impact into unimaginable territory.
Whether a settlement of this magnitude actually discourages the kind of behavior that made 1MDB possible in the first place is still up for debate. Financial circles believe that these payouts, no matter how big they appear in media reports, are absorbed into the intricate calculations of institutional banking; they are important, uncomfortable, but manageable. Jho Low is still at large. Former Malaysian Prime Minister Najib Razak, who founded 1MDB, is incarcerated in Malaysia. A large portion of the money is still missing.
It feels more like bookkeeping than justice to watch this specific chapter come to an end. A judge’s approval is still needed for the settlement. A representative for Goldman declined to comment. And the final figures are still being calculated somewhere.
