Two Swiss Appear In Court For Role In 1MDB Fraud

(MENAFN- Swissinfo) The Malaysian 1MDB fraud scandal went around the world in 2015. Now two Swiss dual nationals are on trial at the Federal Criminal Court in Bellinzona. Here is an explainer.

This content was published on April 4, 2024 - 09:41 5 minutes Sibilla Bondolfi, SRF
  • Deutsch de Zwei Genfer stehen wegen 1MDB-Betrug vor dem Schweizer Bundesstrafgericht Original Read more: Zwei Genfer stehen wegen 1MDB-Betrug vor dem Schweizer Bundesstrafgericht

What is it all about?

Almost ten years ago, a whistleblower from Switzerland revealed that the former Prime Minister of Malaysia, Najib Razak, and his entourage had embezzled billions of dollars from the state fund 1MDB. Two Swiss dual nationals are also alleged to have enriched themselves. They will be tried before the Federal Criminal Court in Bellinzona from April 2.

What is alleged to have happened?

Two managers of the Swiss company PetroSaudi arranged a joint venture – in which both sides contributed capital and expertise – with the Malaysian sovereign wealth fund 1MDB on a yacht off the coast of Cannes. 1MDB wanted to contribute $1 billion (CHF900 million), PetroSaudi wanted oil fields in Turkmenistan. So far, so legal. But according to the indictment from the Swiss Office of the Attorney General (OAG), PetroSaudi did not own the oil fields.

1Malaysia Development Berhad (1MDB for short) is the name of a Malaysian sovereign wealth fund. Originally it was supposed to bring development and progress to Malaysia, but it now stands for the biggest financial scandal in recent history, and not just for the Asian country. The fund was literally plundered, with billions of dollars flowing all over the world.

The Malaysian businessman Jho Low, who alone squandered hundreds of millions of dollars on his luxury lifestyle, is regarded as the main mastermind. This included the most expensive penthouses in the world's major cities, yachts, private jets and parties with the world's rich and famous. According to the US Department of Justice, which is leading the investigation, a total of at least $4.5 billion was embezzled from the fund; $700 million alone later reappeared in the private accounts of the then Malaysian Prime Minister Najib Razak.

Some $7 billion from 1MDB flowed through accounts in Switzerland, $6 billion of which was illegal. This also includes the first $700 million that Jho Low diverted from the fund in 2009 and transferred to an account at the Zurich-based private bank Coutts.

What are the PetroSaudi managers accused of?

The managers, a Swiss-Saudi and a Swiss-British dual national, invested some of 1MDB's money in oil production in Venezuela, but they kept most of the profits for themselves instead of sharing them with Malaysia. The OAG also accuses them of diverting hundreds of millions of dollars to their own accounts. The two defendants deny having done anything illegal.

What role did Switzerland play?

Without actors from Switzerland, the scandal would never have really come to light. The Swiss Bruno Manser Fund learnt about the corruption from Malaysian sources and filed a complaint in Switzerland in 2014. However, the OAG did not take the matter in hand at the time.

In 2015 a whistleblower from Switzerland came to the attention of the media. The former PetroSaudi employee disclosed suspicious transactions. The authorities in the US, Singapore and Switzerland then took action. It turned out that a large proportion of the embezzled 1MDB funds had been moved via the Swiss financial centre. The world press covered this.

The Swiss whistleblower Xavier Justo worked for the Geneva-based company PetroSaudi. When he left, he stole data and sold it to a Malaysian newspaper. KEYSTONE

What significance does the trial have for Malaysia?

The trial in Switzerland is important for the investigation of the 1MDB fraud scandal in Malaysia. In Malaysia, the scandal was initially covered up: a public prosecutor went to prison, a lawyer was encased in concrete in an oil drum, a banker was shot dead in the street and a pregnant translator was blown up. All of these people knew about the corruption and wanted to publicise it. After the scandal came to light, Najib Razak was not re-elected in the 2018 elections. Instead, there were several court cases. Razak is currently in prison.

What happens to the money?

1MDB is appearing as a private plaintiff in the trial. The state fund is making civil claims totalling over $5 billion. The Office of the Attorney General has frozen around CHF192 million ($212 million) in Swiss bank accounts and blocked four properties, including a chalet in Gstaad. At least some of the money could therefore be returned to Malaysia. This is all the more important because other embezzled 1MDB funds in Swiss bank accounts ended up in the Swiss federal treasury.

What happens now?

The Federal Criminal Court has set aside the whole of April for the trial. It could take months before a judgement is reached.

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