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Goldman Sachs agrees to a $ three.9 billion cope with Malaysia to unravel the prison investigation into the 1MDB scandal

Copies of the Financial Daily newspaper with a front cover report about Goldman Sachs Group Inc. will be available for sale on Tuesday, December 18, 2018 at a booth in Kuala Lumpur, Malaysia.

Nadirah Zakariya | Bloomberg | Getty Images

Goldman Sachs said on Friday that it had resolved an important part of an international scandal by agreeing to a $ 3.9 billion deal with Malaysia.

The bank will pay Malaysia $ 2.5 billion in cash for its key role in the 1MDB debacle and guarantee that the country will receive at least $ 1.4 billion in proceeds from worldwide seized assets.

"This agreement from Goldman Sachs is an acknowledgment of the misconduct of two of his former employees as part of the larger 1MDB fraud and corruption program," said the Malaysian finance minister in a statement.

The deal paves the way for Goldman to agree with the US authorities on its role in the system, a person with knowledge of the situation said. Agreement with the Department of Justice has been expected since the beginning of this year and has reportedly been delayed as Goldman tries to avoid admitting guilt in this case.

In this case, an agreement with the U.S. would remove a cloud that has been hanging over CEO David Solomon since joining Goldman in late 2018. Goldman bankers have been accused of helping a Malaysian financier loot billions of dollars from the $ 6.5 billion 1MDB fund. Money that should contribute to the development of the country's economy.

Instead, the money raised through goldman-backed bond deals in 2012 and 2013 was reportedly used by Malaysian financier Low Taek Jho to fund a shopping spree of epic proportions, including real estate and art around the world, a yacht in the Worth $ 250 million and a stake in the Martin Scorsese film "The Wolf of Wall Street".

Malaysia withdraws pending lawsuits and says there will be no charges against the bank and its employees, except for Tim Leissner and Roger Ng, former Goldman bankers, who have been accused of helping Low. While Leissner pleaded guilty for his role in the system, Ng pleaded not guilty and was extradited to the United States last year to face the Department of Justice charges.

Goldman said it would "significantly increase" its litigation provisions for the second quarter, a period when the bank posted blockbuster gains amid a boom in Wall Street trading.

Wells Fargo bank analyst Mike Mayo said the company's overall bill for the episode, which many consider to be the worst scandal since the financial crisis, is expected to be $ 4.5 billion after dealing with the U.S. for 2 Resigned billions of dollars. That is "far below" the highest estimate of $ 10 billion in spending that has been accepted by some investors, he said. The bank had received approximately $ 600 million in fees for the 1MDB bond business.

The $ 1.4 billion in wealth guarantees for Malaysia shouldn't cost the bank much, Mayo said.

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