1Malaysia Development Berhad
| Company type | Government-owned company |
|---|---|
| Industry | Strategic development, investment |
| Founded | 2008 as Terengganu Investment Authority; rebranded as 1MDB on 31 July 2009 |
| Founder | Terengganu Menteri Besar Ahmad Said (as TIA) |
| Headquarters | Kuala Lumpur , Malaysia |
Area served | Malaysia |
| Products | Investments in energy, real estate, and strategic development projects |
| Owner | Minister of Finance (Incorporated), Malaysia |
| Parent | Minister of Finance (Incorporated) |
1Malaysia Development Berhad (1MDB; ) is a Malaysian strategic development entity currently insolvent and fully owned by the Minister of Finance (Incorporated).
In 2015, 1MDB became embroiled in a significant international corruption controversy, marked by accusations of money laundering, fraud, and embezzlement. The United States Department of Justice (DOJ) lawsuit alleged that at least US$3.5 billion had been misappropriated from the fund. US Attorney General Jeff Sessions characterized the case as "kleptocracy at its worst." By September 2020, the amount reportedly stolen had increased to US$4.5 billion, with outstanding liabilities totaling US$7.8 billion. The scandal implicated then Malaysian Prime Minister Najib Razak, playing a key role in his party’s defeat in the 2018 general elections and leading to his subsequent trial and incarceration.
As of August 2022, the U.S. Department of Justice successfully recovered and returned US$1.2 billion of the misappropriated funds to Malaysia, as part of a wider international initiative against kleptocratic practices. Multiple other nations have also pursued or completed recovery efforts involving smaller sums connected to 1MDB.
History
Originally established in 2008 as the Terengganu Investment Authority (TIA) by Terengganu’s Menteri Besar Ahmad Said, this sovereign wealth fund was created with RM11 billion (approximately US$3.25 billion) to foster economic growth within Terengganu. Funding sources included RM6 billion from outstanding royalties alongside bonds issued in both domestic and global markets. Additionally, the Federal Government proposed a RM5 billion guarantee linked to anticipated oil revenue.
On 27 May 2009, under advisement from TIA’s special advisor Jho Low, Ismee Ismail and Shahrol Azral Ibrahim Halmi facilitated through AmInvestment Bank Bhd the issuance of RM5 billion in Islamic medium term notes (IMTNs), despite objections from the Terengganu state government. The net proceeds received by TIA from this issuance amounted to RM4.385 billion.
Subsequently, on 31 July 2009, four months after Najib Razak assumed office as Prime Minister, the Minister of Finance (Incorporated) took control of TIA and rebranded it as 1Malaysia Development Berhad (1MDB). Najib declared that this transformation aimed to extend benefits beyond a single state to all Malaysians.
The portfolio of 1MDB included investments in:
- PetroSaudi Holdings (Cayman) Ltd
- Segregated Portfolio Company (SPC)
- SRC Group
- Real estate projects
- Energy sector ventures
On 10 March 2015, Malaysia’s Auditor General was commissioned to examine 1MDB’s financial records and evaluate its compliance with stated objectives. However, on 4 March 2016, the National Security Council classified the audit report as an official secret.
Following Pakatan Harapan’s electoral victory in 2018, Prime Minister Mahathir Mohamad ordered the declassification of the audit report on 15 May 2018, which exposed multiple irregularities.
On 23 May 2018, Finance Minister Lim Guan Eng appointed PricewaterhouseCoopers to conduct an audit after directors revealed insolvency issues and inability to meet debt obligations. Subsequently, on 28 June 2018, CEO Arul Kanda Kandasamy was terminated for failing to fulfill his responsibilities.
In 2024, entities and liquidators associated with the 1MDB controversy initiated Chapter 15 bankruptcy procedures while pursuing asset recovery efforts.
PetroSaudi Holdings (Cayman) Ltd
On 28 September 2009, 1MDB established a joint venture (JV) called 1MDB-PetroSaudi Ltd with PetroSaudi Holdings (Cayman) Ltd, structured with a 60:41 ownership split—1MDB held a 41% stake through a US$1 billion cash injection, while PetroSaudi contributed assets valued at no less than US$1.6 billion. The investment documents did not reveal that the PetroSaudi name was used by four separate entities.
The following day, on 29 September 2009, Edward L. Morse submitted an asset valuation report coinciding with his appointment as 1MDB CEO. The report evaluated oil exploration and production rights in Turkmenistan and Argentina but referenced assets belonging to PetroSaudi International Ltd, even though the JV agreement specified PetroSaudi International Cayman as the rightful asset owner.
The joint venture contract lacked safeguards for 1MDB’s interests. Notably, PetroSaudi Holdings advanced US$700 million in fees to the JV, which were due for repayment by 30 September 2009. On that date, 1MDB transferred US$1 billion into two separate accounts: US$300 million into the JV’s account and US$700 million into Good Star Ltd’s account—a PetroSaudi subsidiary—repaying the advance without obtaining board consent for this latter transaction.
Six months after the JV's inception, in March 2010, 1MDB sold its entire 40% interest (valued at US$1 billion) in exchange for US$1.2 billion in Murabahah Notes guaranteed by PetroSaudi International Ltd. Following this, 1MDB subscribed to additional Murabahah Notes worth up to US$830 million, partially financed through borrowings.
On 1 June 2012, after holding the Murabahah Notes for over two years, 1MDB redeemed them for a total of US$2.22 billion via an asset swap: its subsidiary, 1MDB International Holdings Ltd, acquired a 49% equity interest in PetroSaudi Oil Services Ltd (PSOSL), itself a subsidiary of PetroSaudi International. The auditor-general highlighted that this exchange was executed without sufficient due diligence concerning PSOSL’s financial health and liabilities. Despite knowing that PSOSL operated in Venezuelan waters under U.S. sanctions, the board proceeded with the transaction. The CEO signed relevant documents prior to receiving formal board approval on 20 June 2012.
By mid-July 2012—only about six weeks after acquiring the PSOSL stake—1MDB divested its entire 49% shareholding to Bridge Partners International Investment Ltd for no less than US$2.2 billion, acting on the CEO’s recommendation. This sale was finalized on 12 September 2012; Bridge Partners issued six promissory notes without interest totaling US$2.318 billion in payment.
These promissory notes were subsequently invested into a segregated portfolio company (SPC).
Segregated portfolio company (SPC)
On 12 September 2012, Brazen Sky Ltd—a subsidiary of 1MDB—entered into an investment management agreement with Bridge Global Absolute Return Fund SPC and Bridge Partners Investment Management (Cayman) Ltd to invest US$2.318 billion funded by promissory notes from the PSOSL sale. This investment comprised various portfolio assets held within a segregated portfolio company registered in the Cayman Islands. However, Bridge Global SPC was newly established and lacked both a fund management license and experience managing substantial funds.
Starting on 20 May 2013, the board of 1MDB began redeeming portions of this investment gradually to bolster confidence in the fund. By 20 December 2014, US$1.39 billion had been withdrawn from the original US$2.318 billion SPC investment, with the remaining balance of approximately US$939.87 million anticipated by year-end. The redeemed amounts were routed through Brazen Sky to 1MDB Global Investment Ltd (1MDB-GIL). Meanwhile, the SPC assets valued at US$2.318 billion had been pledged as collateral to Deutsche Bank securing a loan of US$975 million without approval from the board. Utilizing proceeds from these redemptions alongside the Deutsche Bank loan, roughly US$993 million was paid to terminate the "Aabar option"—a figure substantially exceeding the initial settlement amount of US$300 million. This option granted rights to Aabar Ltd in exchange for a guarantee from Abu Dhabi's International Petroleum Investment Co (IPIC), which facilitated bond issuances totaling US$3.5 billion through Goldman Sachs. These transactions raised concerns due to their deviation from the original plan of repatriating the SPC portfolio back to Malaysia.
SRC Group
On 7 January 2011, 1MDB founded SRC International Sdn Bhd (SRC) with the objective of supplying coal to meet national demand by 2014, as outlined in its business strategy.
SRC obtained government backing, including RM15 million in development grants authorized by the Economic Planning Unit and a RM2 billion loan from the Retirement Fund Incorporation (KWAP). This government-guaranteed KWAP loan, disbursed on 29 August 2011, had a tenure of ten years and carried total financing costs amounting to RM2.902 billion.
On 3 November 2011, SRC’s subsidiary SRC International (Malaysia) Limited entered into a joint venture with Aabar Investments PJS, forming Aabar-SRC Strategic Resources Limited (ASRC), with an initial paid-up capital of US$120 million equally shared between both parties.
The board of SRCI approved a US$45.5 million investment into Mongolia’s coal industry via ASRC’s partnership with Gobi Coal & Energy Limited (GCE), despite the absence of documented feasibility analyses—a decision later scrutinized for insufficient due diligence.
SRC further committed up to US$120 million in PT ABM Investama TBK, an energy sector firm listed on the Indonesia Stock Exchange.
In February 2012, SRC’s CEO announced an anticipated profit of US$4 million from these investments.
On 15 February 2012, 1MDB transferred its SRC equity to Ministry of Finance Incorporation (MOFI) through dividend-in-specie payments. This transaction reduced the 1MDB Group’s operating losses from RM25 million to RM16.2 million, lowered its gearing ratio from 12 times to 9.5 times, and decreased government guarantees totaling RM2.902 billion associated with the group.
Real estate
To diversify its portfolio and secure long-term returns, 1MDB invested in real estate assets. Between 2010 and September 2015, it acquired five properties valued at RM2.111 billion, comprising:
- Land for the Tun Razak Exchange (TRX) project
- Land designated for Bandar Malaysia
- Property in Air Itam, Penang
- Land in Alor Gajah, Melaka
- Land located in Pulau Indah, Selangor
Tun Razak Exchange
On 21 May 2010, 1MDB collaborated with Mubadala Development Company to develop the 34.4-hectare Tun Razak Exchange (TRX) site situated in Kuala Lumpur. The initiative was officially launched on 30 July 2012 by then-Prime Minister Najib Razak, who emphasized TRX and Bandar Malaysia as pivotal public–private partnership projects aligned with Malaysia's transformation objectives.
1MDB purchased the TRX land for RM302.8 million and entered into a joint venture agreement with Aabar Investments PJS on 12 March 2013; however, this partnership encountered delays that hindered project advancement.
By September 2015, five plots within TRX were sold for RM1.358 billion to generate capital, while plans were underway to sell eleven additional plots valued at RM2.592 billion. Moreover, 1MDB joined forces with Mulia Group to develop Exchange 106 (previously known as TRX Signature Tower), which was leased to an international financial services company from 2019 through 2033, expected to produce RM537.38 million in returns.
The financing of TRX infrastructure largely depended on land disposals by 1MDB Real Estate Sdn Bhd (now TRX City Sdn Bhd). A special-purpose vehicle raised approximately RM229.5 million in August 2015. Despite these measures, TRX experienced negative cash flows as revenues failed to cover infrastructure and construction expenses; additionally, RM1.095 billion from land sales and SPV proceeds were redirected back to 1MDB instead of being allocated toward TRX development costs.
Bandar Malaysia
Bandar Malaysia represents a long-term development initiative spanning 26 years, initially acquired by 1MDB for RM368.72 million. An additional RM2.717 billion was allocated—partially funded by the government with RM1.117 billion—to facilitate the relocation of the Sungai Besi Airport and the Royal Malaysian Air Force (RMAF) facilities to eight new locations, with the largest site situated at Sendayan, Negeri Sembilan. However, RM288 million of the government’s allocation was redirected to service 1MDB’s debt instead of its designated purpose.
On 13 May 2010, 1MDB, as part of a consortium, commenced plans to transform the former Sungai Besi Airport area into Bandar Malaysia, aiming for a gross development value (GDV) of RM150 billion. Covering 486 acres, the project is intended to evolve into an Islamic financial hub, with Qatar Investment Authority (QIA) as a strategic partner. Around this period, 1MDB and QIA formalized a memorandum of understanding to explore joint investments in energy and real estate sectors, with QIA proposing an injection of US$5 billion.
The airport relocation was projected for completion by 2016, while the full-scale development of Bandar Malaysia was targeted for completion by 2040. Perbadanan Perwira Harta Malaysia (PPHM), a subsidiary under the Armed Forces Fund Board (LTAT), was designated as the principal contractor overseeing the relocation process. By August 2015, progress on five out of eight relocation sites had stalled due to suspended approvals, delayed submissions, adverse weather conditions, and flash flooding.
Further construction delays were exacerbated by outstanding payments amounting to RM396.42 million owed to PPHM as of September 2015. Of the RM3.75 billion raised through loans and sukuk instruments to fund both airport relocation and development activities, RM1.926 billion (51.3%) was redirected back into 1MDB’s coffers.
As part of its rationalization strategy, on 31 December 2015, 1MDB announced plans to divest a 60% stake in Bandar Malaysia Sdn. Bhd. to a consortium comprising Iskandar Waterfront Holdings (IWH) and China Railway Engineering Corporation (CREC) in a 60:40 shareholding structure. The consortium valued Bandar Malaysia’s land assets at RM12.35 billion, pricing the 60% equity stake at RM7.41 billion, with transaction completion anticipated by June 2016. Nonetheless, this agreement collapsed on 3 May 2017 following payment defaults, as confirmed by Malaysia’s Ministry of Finance.
Air Itam land
The land in Air Itam was primarily acquired for the purpose of developing affordable housing within Penang. Approximately 85.7% ownership lies with 1MDB through acquisitions of Gerak Indera and Farlim Properties (FPSB) at a combined cost of RM1.056 billion plus RM15.25 million in associated expenses. The remaining 14.3% ownership remains unresolved. Development efforts face significant obstacles due to incomplete support from the State Government and unresolved occupation issues involving nearly 2,000 squatters.
Pulau Indah land
The Pulau Indah property was procured for expanding energy sector operations at a purchase price of RM344.24 million from Tadmax Power Sdn Bhd, encompassing an area of 318.41 acres. Initially earmarked for the Project 3B power plant development, plans were relocated to Port Dickson, Negeri Sembilan after determining that the original site was unsuitable. In July 2015, as part of asset rationalization measures, 1MDB placed this land on the market; however, it has yet to be sold.
Energy sector
Since its establishment in 2009, 1MDB pursued energy sector investments through joint ventures involving partners from China and Qatar. These included aluminium smelting operations in Sarawak powered by Bakun Dam, equity stakes in French utility company GDF Suez SA (now Engie), and proposals for regasification terminals alongside gas-fired power plants. However, these initiatives faced setbacks owing to limited energy resource availability and government policies restricting natural gas supply exclusively to Petronas for use by independent power producers (IPPs).
On 11 January 2010, 1MDB entered into a cooperation framework agreement with the State Grid Corporation of China (SGCC) aimed at investing in energy projects within the Sarawak Corridor of Renewable Energy (SCORE), positioning itself as a key investor in SCORE initiatives.
Shortly thereafter on 18 January 2010, it partnered with Abu Dhabi Future Energy Company (Masdar) to explore investments in clean technology projects including establishing Malaysia’s first carbon-neutral city.
In November 2015, as part of restructuring efforts, 1MDB agreed to sell energy-related assets valued at approximately $2.3 billion to China General Nuclear Power Group and its subsidiaries.
Corporate structure
1MDB is governed through a tripartite framework consisting of a board of advisors, a board of directors, and senior executives. Najib Razak chairs the advisory board. From 2010 to 2013, the advisory panel featured distinguished individuals, including Bernard Arnault, CEO of LVMH.
In March 2015, amid increasing scrutiny over financial openness, Najib directed the Auditor General of Malaysia to conduct an audit of 1MDB. The resulting audit report was designated an Official Secret, restricting access solely to the Public Accounts Committee responsible for the fund’s investigation.
By early 2018, 1MDB’s workforce had dwindled to a single employee—CEO Arul Kanda—who was placed on "garden leave" until his contract concluded in June 2018.
Scandal
From its early involvement in the multi-billion-ringgit Tun Razak Exchange initiative, 1MDB attracted criticism. Opposition leader Anwar Ibrahim challenged the firm’s legitimacy, highlighting its absence of a business address and auditor. Concerns were raised regarding 1MDB’s RM425 million (US$140 million) profit recorded between September 2009 and March 2010, with questions about transparency and government capital injections.
In October 2010, 1MDB declared that KPMG audited its accounts, while portfolio valuations were managed by Deloitte and tax advisory services provided by Ernst & Young. The company affirmed adherence to registration protocols. Nevertheless, by 2013, 1MDB requested extensions for submitting annual reports and had switched auditors three times since its establishment, fueling skepticism.
By mid-2015, 1MDB’s liabilities escalated to RM42 billion (US$12 billion), prompting credit rating agencies to downgrade its bonds to junk status. The Malaysian cabinet declined a RM3 billion capital injection, constraining options for debt servicing. Allegations appeared in prominent publications like The Wall Street Journal, accusing misappropriation of state funds linked to former Prime Minister Najib Razak and associates including Jho Low.
In August 2015, the Malaysian Anti-Corruption Commission (MACC) denied any transfers from 1MDB into Najib’s personal accounts. Following this, CEO Arul Kanda publicly dismissed accusations of misconduct and confirmed clearance by the Malaysian Attorney General. In September 2015, 1MDB rejected politically charged media narratives and refuted claims of frozen accounts in Singapore.
The investigations expanded beyond Malaysia’s borders. In February 2016, the US Federal Bureau of Investigation examined ties between a Goldman Sachs executive and Najib related to 1MDB transactions. Parallel probes took place in the UK, Australia, Hong Kong, and Singapore involving financial institutions linked to 1MDB dealings.
In May 2016, Malaysia's Public Accounts Committee attributed governance lapses to 1MDB’s board and former CEO. After the 2018 general election, Finance Minister Lim Guan Eng appointed PricewaterhouseCoopers to conduct a special audit on the fund.
On 28 July 2020, former Prime Minister Najib Razak was found guilty on seven charges including abuse of power, money laundering, and criminal breach of trust connected to 1MDB. He was sentenced to twelve years imprisonment and fined RM210 million—the first time a Malaysian PM faced such convictions.
In February 2021, the British National Crime Agency issued a warrant against law firm Clyde & Co, seeking recovery of US$330 million tied to the initial phase of the 1MDB fraud held in London. Concurrently, the Malaysian government filed suit against Jho Low’s associates Jasmine Loo and Casey Tang for RM9.3 million in unpaid taxes.
In April 2022, Roger Ng, a former Goldman Sachs banker, was convicted in the United States for corruption related to his role in enabling the embezzlement of hundreds of millions from 1MDB.
Najib commenced his prison term at Kajang Prison on 23 August 2022.
Investigations uncovered allegations that Najib solicited financial support from then-UAE crown prince Mohammed Bin Zayed during the probe into the scandal.
Legal proceedings and asset recovery initiatives
In December 2024, 1Malaysia Development Berhad (1MDB) initiated legal action seeking $1 billion in damages from Amicorp Group, accusing the firm of involvement in fraudulent schemes connected to the misappropriation of funds from the national investment entity.
Principal aspects of the lawsuit
- 1MDB alleges that Amicorp Group played a role in establishing and administering shell corporations utilized to siphon assets from the investment fund.
- This legal case is a component of Malaysia's extensive efforts to reclaim assets lost amid the widely publicized 1MDB controversy.
- Amicorp Group has declared its intention to "forcefully contest" the allegations, asserting adherence to all relevant legal and regulatory requirements.