NEW YORK (Reuters): Goldman Sachs has agreed to settle a class-action lawsuit accusing the Wall Street bank of defrauding shareholders about its work for 1MDB, a Malaysian sovereign wealth fund that became embroiled in a corruption scandal.
In a letter filed on Wednesday (April 22) in Manhattan federal court, Goldman and the shareholders said they reached an agreement-in-principle to settle, and plan to submit a settlement for preliminary approval by May 20.
Goldman declined to comment. Lawyers for shareholders led by the Swedish pension fund Sjunde AP-Fonden did not immediately respond to requests for comment. Terms were not disclosed.
Former Malaysian Prime Minister Najib Razak set up 1MDB to promote economic development, with help from Malaysian financier Jho Low, who is now a fugitive.
United States and Malaysian authorities have said US$4.5bil was siphoned away from 1MDB, with some diverted to offshore bank accounts and shell companies linked to Low.
Goldman helped 1MDB sell US$6.5bil of bonds, and collected an estimated $600mil of fees. Shareholders accused the bank of lying about its role in the fraud while repeatedly touting its supposedly robust risk management.
They said Goldman's share price tumbled after investors realised Goldman "actively facilitated - and handsomely profited from" the fraud.
Goldman agreed in 2020 to pay US$2.9bil in penalties and have a Malaysian unit admit criminal wrongdoing to settle 1MDB probes by the US Justice Department and other authorities. A Brooklyn, New York judge formally ended the US criminal case against Goldman in May 2024, after the bank successfully completed a three-year deferred prosecution agreement.
One Goldman banker was convicted of helping loot 1MDB, and another pleaded guilty.
