The 1MDB Heist: How Jho Low & the Prime Minister stole $4.5 billion

Note: the following article is based on extensive research that I undertook prior to the recording of our episode on 1MDB (in 2022). Sources are linked underneath the article- thank you.

In the murky world of international finance, few scandals have captured the public's attention quite like the 1MDB affair. Described as "one of the world's greatest financial scandals" by the media and declared the "largest kleptocracy case to date" by the United States Department of Justice, the 1MDB scandal is a tale of corruption, greed, and the abuse of power at the highest levels of government.

At the heart of this scandal lies the concept of kleptocracy, where corrupt politicians enrich themselves outside the rule of law through kickbacks, bribes, and special favors from lobbyists and corporations, or simply by directing state funds to themselves and their associates. This is precisely what happened with 1MDB, a Malaysian state investment fund set up to build projects and provide jobs and investment for the Malaysian people.

Between 2009 and 2015, Jho Low, a young Malaysian financier and associate of then-Malaysian Prime Minister Najib Razak, orchestrated the theft of over $4.5 billion from 1MDB (1MDB stands for 1 Malaysia Development Berhad and berhad is a Malaysian term for a PLC). The story of how they stole the money and, perhaps more shockingly, how they spent it, is a cautionary tale of the dangers of unchecked power and the importance of transparency in government.

Much of the stolen money went directly to the Prime Minister and his family, as well as corrupt officials in Malaysia and some of the Arabian countries where 1MDB was doing business. However, a significant portion was also spent by Jho Low and his friends on a lavish lifestyle of partying, property, art, and yachts. Incredibly, they even used $100 million of the stolen funds to finance the Hollywood movie "The Wolf of Wall Street." At one point, it was claimed that Jho Low had more personal liquid cash than anyone else in the world.

But behind the glitz and glamour lies a darker story of corruption and its very real victims, including a young mother who was murdered to cover up another corruption scandal that is indirectly linked to 1MDB .

Two journalists deserve special mention for their brave reporting on this scandal: Clare Rewcastle Brown, who runs the Sarawak Report website and received death threats for her coverage, and Mary Ann Jolly of Al Jazeera, whose excellent "101 East" documentary series includes a revealing one-on-one interview with former Malaysian Prime Minister Najib Razak. And a special mention too to Bradley Hope and Tom Wright, authors of The Billion Dollar Whale, a fantastic read that covers the entire story.

The mastermind behind the 1MDB scandal, Jho Low, was born in 1981 in Malaysia to an upper-middle-class family. Though not massively wealthy, his family was able to send him to the prestigious Harrow boarding school in London, which boasts alumni including Winston Churchill and Benedict Cumberbatch. Low then went on to study at the Wharton Business School in Pennsylvania, an institution with its own impressive list of alumni, from Warren Buffett to Elon Musk.

It was during his time in London that Low met Riza Aziz, the stepson of Malaysian Prime Minister Najib Razak. Through this relationship, Low became close with the Prime Minister and his wife, Rosmah Mansor. Far from a passive bystander, Rosmah was as much an active participant in the scheme as her husband and Jho Low.

The 1MDB scandal is a complex web of corruption, greed, and abuse of power that spans multiple countries and involves a cast of colorful characters.

The rise of Jho Low from a young, ambitious financier to the mastermind behind one of the world's biggest financial scandals is a story of networking, influence, and manipulation. Despite the lack of comprehensive information about his early business career, Low's ability to identify and cultivate relationships with powerful individuals was evident from the start.

In 2006, at the age of 25, Low made his first significant deal when he was financed by a Kuwaiti bank to purchase a luxury high-rise building in Kuala Lumpur for $87 million. While the exact profits from this deal remain unclear, it marked the beginning of Low's ascent in the world of international finance.

Following this success, Low established an investment group that included a Malaysian prince, a Kuwaiti sheikh, and a friend from the United Arab Emirates who later became an ambassador to the United States and Mexico. This friend is now one of the most powerful right-hand persons for the Crown Prince of Abu Dhabi, demonstrating Low's talent for networking and identifying people whose status he could leverage to his advantage.

It was through these connections that Low became close to Malaysian Prime Minister Najib Razak and his family, who viewed him as a financial whiz kid. The exact nature of their conversations remains unknown, but in September 2009, a fateful meeting took place on a 300-foot superyacht in the Mediterranean. On board were Jho Low, Prime Minister Najib Razak, his wife Rosmah Mansor, their children, and two influential Saudis: Prince Turki bin Abdullah bin Abdel Aziz, the seventh son of the Saudi king and brother to the infamous Mohammed bin Salman (MBS), and Tarek Obaid, a man Low had met while partying in Geneva.

Obaid had co-founded a company called PetroSaudi International (PSI) with the Saudi prince, which claimed to control oil fields in Central Asia that could be used as collateral to secure cash from state investors. During this meeting on the yacht, a deal was struck for PetroSaudi and 1MDB to form a $2.5 billion joint venture, ostensibly to invest in projects in Malaysia that would create jobs, wealth, and infrastructure. However, the real aim for the main participants was to line their own pockets.

The deal moved at a breakneck pace. Within weeks of the meeting, 1MDB injected its first billion into the joint venture, and $700 million was immediately taken out, supposedly to pay back a loan owed to PetroSaudi's parent company. The 1MDB board was told that PetroSaudi had given the joint venture a loan that needed to be repaid immediately.

Throughout the scandal, Jho Low maintained that he had no involvement with 1MDB. And despite never actually sitting on the board of 1MDB, emails published by the Sarawak Report website and the Wall Street Journal revealed that it was Low who crafted the entire joint venture deal before either PetroSaudi or 1MDB saw the plan. Low leveraged his relationship with Prime Minister Razak, who held total authority over 1MDB as both Prime Minister and Finance Minister, to bend and bribe the 1MDB board to his will.

The $700 million taken from the joint venture was paid into a Zurich bank account controlled by Jho Low, all within a matter of weeks from the initial meeting on the yacht. This brazen act of corruption set the stage for the massive 1MDB scandal that would unfold over the coming years.

The web of corruption surrounding the 1MDB scandal quickly expanded, with Jho Low using his ill-gotten gains to fund an extravagant lifestyle for himself and his associates. On the same day that $700 million was transferred out of the 1MDB-PetroSaudi joint venture, two PetroSaudi directors, Tarek Obaid, 32, and Patrick Mahony, 33, each received $85 million from Low. These two individuals had only become involved in the deal a few weeks prior, essentially being paid to help Low steal from the Malaysian state fund.

With $530 million remaining after paying off Obaid and Mahony, Low and his friends embarked on a lavish spending spree. One of Low's trusted lieutenants posted a message on Facebook the day after the transfer, exclaiming, "I feel the earth move under my feet." Ten days later, another message followed: "In Vegas, bring a jacket cos it's raining crystal haha."

Between October 2009 and June 2010, Low and his entourage allegedly spent over $80 million on alcohol, gambling in Las Vegas, private jets, renting superyachts, and paying Playmates and Hollywood celebrities to hang out with them. One famous Hollywood personality claimed to have been offered half a million dollars to accompany Low to Las Vegas, with all expenses paid, though they declined the offer.

Low developed a particular fixation on Paris Hilton - the two were frequently seen partying together. For Hilton's 29th birthday in Las Vegas, Low gifted her a Cartier watch and $250,000 in gambling chips, with Low himself proceeding to lose $2 million at the baccarat table in just 10 minutes. An observer commented that "he acted like the cash wasn't his own."

The initial $700 million theft was just the start of it as Low orchestrated further injections of cash from 1MDB. In July 2010, he convinced 1MDB to invest an additional $500 million into the joint venture, using $260 million of it to purchase a Malaysian bank in which he was already a major shareholder and at an inflated price. A few months later, 1MDB lent another $830 million to the joint venture, with $330 million allegedly ending up in Low's Swiss account.

Within the first two years of 1MDB's existence, over $1 billion had been syphoned off by Low, with suspicions that a significant portion was kicked back to Malaysian Prime Minister Najib Razak and his wife, Rosmah Mansor.

Low set his sights on stealing even more and to do this, he employed the services of Tim Leissner, the charismatic and controversial chairman of Goldman Sachs Southeast Asia. Known for his womanizing ways and party-loving lifestyle, Leissner had converted to Islam twice to impress Muslim women he was dating. His reputation for bringing in business made him well-suited to countries like Malaysia, where business and government often worked together on deals, where bribes are part of the culture. Skimming money from deals is part of the thing.

And while Leissner was earning around $10 million a year before he met Low, he wanted more- more money and more recognition, he didn’t want to be the guy who just put the deals together, he wanted to have a percentage of the deal, he wanted to be a player.

During the 1MDB scandal, Leissner married Kimora Lee Simmons, the former wife of Def Jam founder Russell Simmons, while still being married to another woman, providing Simmons with photoshopped divorce documents. Leissner's involvement with 1MDB would soon take the scandal to new heights, with Goldman Sachs playing a central role in the unfolding drama.

Leissner and his colleague Roger Ng worked with Low to ensure that Goldman Sachs was hired to raise money for bonds that would be invested in 1MDB. In 2012 and 2013, Goldman underwrote three bond sales, raising $6.5 billion for 1MDB and earning a staggering $600 million in fees – nearly 10% commission, far above the standard 1-2%. This unusually high commission may have been due to the fact that Goldman had previously rejected Low as a client due to compliance concerns about the source of his money.

Of the $6.5 billion raised by Goldman for 1MDB, Low syphoned off $2.5 billion, fueling an even more extravagant spending spree. While some legitimate businesses were acquired by 1MDB, it was the money spent by Low on property, art, jewellery, and partying that highlights the extravagance and recklessness .

Low's purchases included a $30.5 million penthouse in New York's Time Warner Center, a $14 million condo in Soho, a $39 million house in LA, a $17.5 million house for the Malaysian PM's stepson in LA, a $35 million penthouse in London, a £17 million red brick in Belgravia, and a $35 million private jet.

In 2013 alone, Low spent $330 million on art, including a record-breaking $48.8 million for Jean-Michel Basquiat's "Dustheads" and $179 million for Picasso's "Women of Algiers." Between April 2013 and September 2014, he purchased $200 million worth of jewellery, with $8 million spent on gifts for supermodel Miranda Kerr, whom he allegedly dated in 2014.

Perhaps the most infamous purchase was a $27 million pink diamond necklace by prestigious New York jeweller Lorraine Schwartz for Rosmah Mansor, the wife of the Malaysian Prime Minister. Low met Rosmah and Schwartz on a yacht in the Mediterranean, with the yacht rental alone costing $4 million. In 2014, Low decided to purchase his own yacht, the Equanimity, for a staggering $261 million.

Low's 31st birthday party in Las Vegas in 2012 was another example of his excessive spending. The party, attended by over 300 guests including Leonardo DiCaprio, Jamie Foxx, Paris Hilton, Kanye West, Kim Kardashian, Robert De Niro, and Michael Phelps, featured an indoor Ferris wheel and an ice-carved bar. Britney Spears was reportedly paid $1 million to jump out of a cake and sing "Happy Birthday," while South Korean singer Psy was rumoured to have been paid even more for his performance. The late Robin Leach, host of "Lifestyles of the Rich & Famous," called it "the most expensive party that Las Vegas has ever seen," estimating a cost of $100 million.

Perhaps the most ironic investment was Low's financing of the Hollywood production company Red Granite, owned by the Malaysian Prime Minister's stepson Riza Aziz. Using $100 million from the 1MDB fund, Red Granite produced "The Wolf of Wall Street," a movie about a man who swindled millions of dollars and spent it on properties, parties, and a big yacht – a story that mirrored Low's own life.

The connection between Jho Low and Leonardo DiCaprio is a prime example of how the stolen 1MDB funds were used to gain access to and influence Hollywood's elite. Low and DiCaprio became close friends, with numerous photos of them together at premieres and awards ceremonies for "The Wolf of Wall Street." In his Golden Globes acceptance speech for Best Actor, DiCaprio even thanked Low for financing the film. Low's lavish gifts to the actor included a $3.2 million Picasso painting and an Oscar statuette originally awarded to Marlon Brando.

However, none of Low's extravagant spending and swindling could have occurred without the involvement and approval of Malaysia's most powerful man, Prime Minister Najib Razak. Razak, who comes from a family of political royalty in Malaysia, was initially seen as a moderate and liberal leader. He reformed tough laws on public gatherings, cut government subsidies, and loosened restrictions on foreign investment. However, as allegations of corruption began to surface, Razak's stance shifted, and he reinstated detention without trial and pursued critics on sedition charges.

The 1MDB scandal was not Razak's first brush with controversy. In 2002, while serving as Minister of Defence, he signed a €1.2 billion deal to purchase three French submarines. Altantuya Shaariibuu, a young Mongolian interpreter and mother, worked on the deal. It later emerged that a €114 million kickback from the deal went to a company controlled by Razak's right-hand man, supposedly for "consulting work," despite the company having been established just months before the contract was signed.

Altantuya, who was also having an affair with Razak's right-hand man, was allegedly promised €500,000 for her role in the deal. When she never received the money and threatened to expose what she knew, she was kidnapped, shot dead, and her body blown up with military-grade explosives. Two elite policemen were found guilty of her murder, but they have claimed that Razak ordered the killing.

Razak's personal enrichment from the 1MDB fund was substantial. Within days of the close of the 2013 Goldman Sachs bond offering, US$681 million of the diverted funds was transferred to an account belonging to Razak. This transfer came to light in 2015, thanks to the Sarawak Report's publication of detailed documents obtained from a whistleblower.

When the story broke, Razak used his power to silence critics and obstruct investigations. He fired the Attorney General and replaced him with someone more compliant, arrested politicians who raised concerns, and promoted four members of the investigating parliamentary accounts committee to cabinet positions, effectively suspending the committee's work. In a suspicious turn of events, a fire swept through police headquarters, destroying records of white-collar crimes.

It's clear that Najib Razak and his associates went to great lengths to cover up their involvement in the 1MDB scandal. As the Sarawak Report and other media outlets began to uncover the truth, the Malaysian government took drastic measures to silence critics and block the flow of information. They attempted to have Interpol issue a "Red Notice" for the arrest of Clare Rewcastle Brown, the editor of Sarawak Report, who also received death threats for her reporting.

When the $681 million transfer to Razak's account came to light, he initially claimed it was a donation from Saudi Arabia, a reward for Malaysia's efforts in combating Muslim extremists. This explanation was supported by a spokesperson from the Saudi government. However, the Wall Street Journal and Sarawak Report presented evidence that the funds had actually come from an account connected to Jho Low in Singapore. Despite this, Malaysia's new Attorney General declared that everything was in order and that Razak had returned $620 million of the "unused" funds to the Saudi royal family.

Razak likely believed he would never face consequences for his actions, as his party had held power in Malaysia since the country's first general elections in 1959. However, in a stunning turn of events, Razak's party lost the 2018 election to an opposition that campaigned on the promise of investigating the 1MDB affair.

Following the election, police raids on properties belonging to Razak and his wife, Rosmah Mansor, revealed a shocking amount of ill-gotten wealth, including 567 luxury handbags filled with over $30 million in cash, 423 luxury watches, and 12,000 pieces of jewellery valued between $223-273 million. Notably absent was the infamous $27 million pink diamond necklace.

In a one-on-one interview with journalist Mary Ann Jolly after the scandal had been exposed, Razak attempted to defend himself, claiming that the money, jewels, and his son-in-law's film investment were all gifts from generous Arabian princes. However, his lies became increasingly transparent, and he eventually walked out of the interview.

In July 2020, Najib Razak was found guilty on seven charges and sentenced to 12 years in jail and a fine of $49.5 million. His wife, Rosmah Mansor, who was central to the corruption and personally received tens of millions in jewellery from Malaysian business people in exchange for favourable government contracts, was also found guilty in September 2022 and sentenced to ten years in prison and a $194 million fine (at the time of writing she is currently out on bail).

The 1MDB scandal is a complex web of corruption, abuse of power, and the silencing of critics. It serves as a stark reminder of the importance of a free press, an independent judiciary, and the courage of individuals like Clare Rewcastle Brown and Mary Ann Jolly, who work tirelessly to expose the truth in the face of great personal risk.

The 1MDB scandal continues to evolve, with the potential for further twists and turns in the coming years. Despite her conviction, Rosmah Mansor remains free pending her appeal later this year. Given the return of Razak's party to power as part of a coalition and the deep-rooted corruption in Malaysia, there is a possibility that she may avoid sentencing and Razak could be released prematurely.

Other key players in the scandal have faced varying consequences. Tim Leissner, the former Goldman Sachs executive, turned state witness in the USA, paying a $43 million fine with his case still pending. His testimony led to the sentencing of his colleague Roger Ng, the former head of Goldman Malaysia, to 10 years in jail. Goldman Sachs itself settled cases with the Malaysian government and the US Department of Justice, costing the bank over $5 billion.

Tarek Obaid and Patrick Mahony, the PetroSaudi directors who received $85 million each in commissions for facilitating the initial theft of $700 million, were charged by Malaysia in absentia in 2020, with arrest warrants issued for them. Red Granite, the production company behind "The Wolf of Wall Street," was dissolved after paying a $60 million settlement.

The mastermind behind the scandal, Jho Low, is believed to have taken refuge in China, with hundreds of millions of dollars hidden away. The authors of "Billion Dollar Whale" have tracked $333 million to a company in the British Virgin Islands connected to Low. Despite Interpol Red Notices and a US arrest warrant, Low remains at large, with the authors asserting that "too many powerful people in Malaysia are connected to Low."

Interestingly, Low has attempted to use his money to lobby US politicians to drop criminal charges against him. In a related development, Pras, a former member of the Fugees, was charged by a federal grand jury for running an unsuccessful back-channel campaign to persuade the US to drop charges against Low. Pras' trial is set to begin on March 27th, 2023.

Perversely, Low has gained a certain level of admiration in Malaysia for his ability to pull off one of the biggest financial heists in history, catalyse the first regime change in the country, and evade authorities. This highlights the deep-seated corruption in Malaysia, where a figure like Najib Razak, who is also suspected of involvement in the murder of a young mother, could potentially be released and even return to public office in the future.

To date, only around a quarter of the estimated $4.5 billion stolen has been recovered. The 1MDB scandal serves as a sobering reminder of the challenges faced by countries grappling with systemic corruption and the importance of international cooperation in bringing those responsible to justice.

Sources

Book: Billion Dollar Whale by Bradley Hope & Tom Wright

https://www.youtube.com/watch?v=p4lj6lC4lrk

https://www.sarawakreport.org/2015/02/heist-of-the-century-how-jho-low-used-petrosaudi-as-a-front-to-siphon-billions-out-of-1mdb-world-exclusive/

https://www.sarawakreport.org/2015/02/jho-lows-people-a-life-in-the-day/

https://nypost.com/2018/09/15/i-own-you-youre-my-bitch-jho-lows-hollywood-power-play/

https://open.spotify.com/episode/1QoFMuXK65tLBOeQnb1o71?si=mRLz5z9NTDScOBR6UBKsmA

https://www.theguardian.com/world/2016/jul/28/1mdb-inside-story-worlds-biggest-financial-scandal-malaysia

https://www.bbc.com/news/world-asia-46341603

https://www.youtube.com/watch?v=cZtXekDzV20

https://www.nytimes.com/2019/01/16/business/goldman-malaysia-1mdb-leissner.html

https://www.bbc.com/news/business-47148641