Wall Street titan Goldman Sachs has agreed to pay $500 million to resolve a class action lawsuit, which accused the firm of defrauding shareholders regarding its involvement with 1MDB, a Malaysian sovereign wealth fund entangled in a vast corruption scandal. Goldman Sachs is a prominent Wall Street investment bank that provides a wide range of financial services including investment banking, securities, investment management, and consumer banking. The $500 million settlement figure, previously undisclosed, was revealed in a Wednesday filing within Manhattan federal court by the shareholders’ legal representatives, led by Swedish pension fund Sjunde AP-Fonden.
The lawsuit alleged that Goldman Sachs misled investors about its role in the 1MDB fraud, despite consistently promoting its robust risk management systems. Shareholders claimed the bank’s share price plummeted after investors realised Goldman had “actively facilitated – and handsomely profited from” the scheme. 1MDB, established by former Malaysian Prime Minister Najib Razak with assistance from now-fugitive financier Jho Low, was intended to foster economic development. U.S. and Malaysian authorities reported that approximately $4.5 billion was siphoned away from the fund, with portions diverted to offshore bank accounts and shell companies linked to Low. Goldman Sachs had helped 1MDB issue $6.5 billion in bonds, reportedly earning an estimated $600 million in fees.
This latest settlement follows Goldman Sachs’ 2020 agreement to pay $2.9 billion in penalties and have a Malaysian unit admit criminal wrongdoing to settle separate 1MDB probes conducted by the U.S. Justice Department and other authorities. A Brooklyn, New York, judge formally concluded the U.S. criminal case against the bank in May 2024, after the completion of a three-year deferred prosecution agreement. One Goldman banker was convicted and another pleaded guilty in connection with the looting of 1MDB. The current $500 million class action settlement is still subject to formal approval by a judge. Neither Goldman Sachs’ lawyers nor a spokesperson for the bank provided immediate comment.
