Swiss Criminal Court: Two PetroSaudi Managers Stand Trial for Alleged Fraud and Money Laundering in Largest Swiss-linked Malaysian Sovereign Wealth Fund Scandal

Background

Two high-ranking managers of the Saudi oil exploration company PetroSaudi faced trial at the Swiss Federal Criminal Court in Bellinzona on Tuesday, January 25, 2023, for their alleged involvement in a commercial fraud, aggravated money laundering, and aggravated criminal mismanagement scenario connected to the multi-billion-dollar 1 Malaysia Development Berhad (1MDB) scandal.

Accused Executives

The defendants, a Swiss Saudi citizen and a British-Swiss national, whose identities were withheld for privacy reasons, were accused of orchestrating a complex fraud scheme with the Malaysian sovereign wealth fund involving false premises for a joint venture agreement.

Alleged Fraud and Money Laundering

Malaysian authorities have reportedly stated that over $4.5 billion was pilfered from the 1MDB fund, which was initiated in 2009, and laundered through bank accounts in the US and abroad. The accused PetroSaudi executives are also suspected of having colluded with accomplices, including a former Malaysian Prime Minister, in the massive financial heist.

Swiss Prosecutors’ charges

Swiss prosecutors have filed charges against the defendants based on their alleged manipulation of 1MDB during at least a six-year period, from 2009 to 2015. It is believed that the PetroSaudi managers misappropriated approximately $1.8 billion that was transferred to the state-owned investment fund.

Joint Venture Agreement

The trial unveiled that the defendants attempted to secure a joint venture between 1MDB and PetroSaudi in 2009, leading the Malaysian investment fund to contribute $1 billion. PetroSaudi, in turn, promised assets, primarily oil fields in Turkmenistan and Argentina, valued at $2.7 billion. However, upon further investigation, it was discovered that PetroSaudi did not in fact own these assets.

Misappropriated Funds

Approximately $700 million from the 1MDB fund was then transferred to a Swiss bank account linked to a Malaysian investor. Tens of millions were further siphoned off to the defendants and PetroSaudi. These funds reportedly did not serve the intended joint venture and were misused for personal gain.

Additional Intricate Plots

Furthermore, the trial revealed that the PetroSaudi managers engineered additional intricate plots with the aim of compelling the 1MDB board to release an additional $830 million following the joint venture. These funds too were allegedly diverted by the defendants.

Luxury Items, Films and Prison Sentence for Najib Razak

The 1MDB fund was led by former Malaysian Prime Minister Najib Razak, who was arrested and sentenced to 12 years in prison in August 2022 for corruption charges. Over $700 million from the stolen funds reportedly found its way directly to Najib’s personal bank accounts. Some of the stolen money reportedly paid for jewelry, hotels, artwork, and a luxury yacht, as well as financing big-budget Hollywood films such as “The Wolf of Wall Street.”

Trial

The three-judge panel at the Swiss Federal Criminal Court is to hear arguments in the case until the end of April.