Summary

Goldman Sachs has become entangled in the sprawling Malaysia 1MDB scandal, with potentially disastrous consequences for the iconic US bank.

1Malaysia Development Berhad (1MDB) is a state-owned development vehicle founded by the Najib administration in 2009. It has since become the focus of a massive investigation across several countries. The investigation has implicated former prime minister Najib Razak in the embezzlement of over $600 million in state funds – a sum that, upon discovery in his bank account by the authorities, Najib insisted was a donation from the Saudi royal family. In all, the US Department of Justice estimates that some $4.5 billion was misappropriated from the now infamous development fund.

The legal reckoning, if any, that Goldman Sachs faces will become clearer after a US Department of Justice meeting with bank officials on Tuesday. Repercussions range in severity from slap-on-the-wrist fines to the more unlikely nuclear option of temporarily revoking the bank’s license.

Goldman Sachs stock tumbled 7.5% on Monday, hitting a two-year low.