Offshore investment in Cayman Islands

> Board issued nine directives to bring back US$2.318bil, but no action was taken by management.

On Sept 12, 2012, 1MDB swapped its 49% stake in PetroSaudi Oil Services Ltd (PSOSL) for six promissory notes amounting to US$2.318bil from Bridge Partners, a fund management company based in Hong Kong.

On the same day, 1MDB’s subsidiary – Brazen Sky Ltd – entered into an agreement with a Cayman Island-based fund management company linked to Bridge Partners to invest US$2.318bil into various types of portfolios under a segregated portfolio company (SPC) structure.

The Cayman Island-based fund management company was only one month old, had no fund management licence and was without a track record of managing large funds.

The board issued nine directives to redeem the investments between May 2013 and August 2014, but the 1MDB management did not take any action.

On Dec 20, 2014, the board was told that of the amount in Cayman Islands, a sum of US$1.392bil had been redeemed and that the remaining US$939.87mil with the SPC would be returned by the end of that year.

However, the entire SPC portfolio had been pledged to Deutsche Bank for a loan of US$939.7mil, while the redeemd amount of US$1.392bil had been transferred to 1MDB Global Investment Ltd.

In essence, the money did not come back to Malaysia as requested by the board.

What is left of the RM5bil raised in 2009 finally became investments worth US$939.87mil in the form of units in an SPC based in Cayman Islands as of March 31, 2015.