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Goldman Sachs (GS) Faces Criminal Charges Over 1MDB Case

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The Goldman Sachs Group (GS - Free Report) and two of its former employees have been slapped with criminal charges by Malaysia in relation to the 1Malaysia Development Bhd (1MDB) scandal. However, the bank continues to deny any wrongdoing.

The Malaysian government seeks to charge a total penalty of more than $2.7 billion worth funds that were allegedly misused and the $600 million that Goldman had received as fees. Moreover, the two employees, if proven guilty, will have to serve prison terms of up to 10 years.

Goldman has been scrutinized for playing a part in raising funds through bond offerings for 1MDB — the fund, which is facing corruption and money-laundering probes in roughly six countries. Notably, per the U.S. Department of Justice, misappropriation of funds worth nearly $4.5 billion from 1MDB by top officials of the fund and their colleagues from 2009 through 2014 also included funds raised through Goldman.

Edward Naylor, Goldman’s Spokesman said, “We believe these charges are misdirected and we will vigorously defend them and look forward to the opportunity to present our case,”. He added, “The firm continues to cooperate with all authorities investigating these matters.”

In early December 2018, the Federal Reserve had speed up the investigation of the matter. Goldman’s representatives met with the central bank and defended the bank’s controls.

Goldman’s involvement in 1MDB scandal has taken a toll on its shares. The stock is down 28.7% in the past three months compared with the industry’s decline of 21.7%.

While the Federal Reserve is yet to disclose the sanctions that would be imposed on the bank, the matter is likely to have a significant effect on its financials. Also, other pending litigation issues remain a concern for the company.

Goldman currently carries a Zacks Rank #3 (Hold).

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