May 21 - Goldman Sachs has reached agreement to pay $500 million to resolve a class action brought by shareholders who alleged the bank misled investors about its role advising 1MDB, the Malaysian sovereign wealth fund at the center of a major corruption scandal.
The settlement amount was disclosed in a filing on Wednesday in federal court in Manhattan by the shareholders' lawyers. The plaintiffs' legal team, which was led by Swedish pension fund Sjunde AP-Fonden, described the proposed resolution as "an outstanding result for the class" in the filing. A federal judge must still review and approve the settlement before it becomes final.
Goldman had previously indicated last month that the parties had agreed to a settlement in principle but did not publicly reveal the financial terms at that time. In the Manhattan filing this week, counsel for the shareholders specified the $500 million figure. Representatives for Goldman Sachs and the bank's outside counsel did not immediately provide comment in response to requests.
The litigation centered on Goldman Sachs' work for 1Malaysia Development Berhad, or 1MDB, a fund set up by former Malaysian Prime Minister Najib Razak purportedly to spur economic development. Malaysian financier Jho Low has been described in filings as a key figure in orchestrating the fraud; he is currently a fugitive. U.S. and Malaysian authorities have stated that $4.5 billion was diverted from 1MDB, with some of the money moved into offshore accounts and shell companies connected to Low.
Goldman assisted 1MDB with the sale of $6.5 billion of bonds and is estimated to have received about $600 million in fees related to those transactions. Shareholders alleged the bank misrepresented the nature of its involvement and repeatedly promoted what it characterized as strong risk-management practices, while actually facilitating and profiting from the misconduct. The plaintiffs said Goldman's stock price fell after investors became aware of the bank's alleged active role.
This shareholder settlement comes after earlier legal and enforcement outcomes related to 1MDB. In 2020 Goldman agreed to pay $2.9 billion in penalties and consented to have a Malaysian unit admit criminal wrongdoing to resolve investigations by the U.S. Department of Justice and other authorities. A Brooklyn judge formally closed the U.S. criminal case against Goldman in May 2024 after the bank completed a three-year deferred prosecution agreement. Separately, one Goldman banker was convicted of participating in the looting of 1MDB, and another pleaded guilty.
The matter also drew attention to investor questions about underwriting practices, fee arrangements, and the contours of risk oversight at major investment banks. The settlement announced this week addresses the civil claims from shareholders but remains subject to court approval and the procedural steps required in the federal venue where the filing was made.
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