Swiss Court Convicts Executives for Malaysia’s $1.8B 1MDB Embezzlement Scandal

The Swiss Federal Criminal Court has convicted two senior executives from an oil exploration company for embezzling over $1.8 billion from Malaysias state investment fund, 1MDB. The verdict, delivered on Wednesday, marks another chapter in the 1MDB scandal, an extensive case of international corruption that has implicated numerous financial institutions and individuals since allegations first emerged in 2015.

Swiss-British national Patrick Mahony and Swiss-Saudi citizen Tarek Obaid were found guilty of orchestrating a fraudulent joint venture with 1MDB. Prosecutors stated that the two created the false impression that their company, PetroSaudi, was backed by the Saudi Arabian government. They leveraged this misrepresentation to convince 1MDBs board to sign onto the venture in 2009, subsequently defrauding the fund.

Court documents revealed that the pair extracted $1.8 billion from 1MDB, with Obaid securing at least $805 million and Mahony receiving $37 million. Both executives have been handed prison sentences—seven years for Obaid and six years for Mahony. In addition to their prison terms, the court ordered the confiscation of their assets, which include properties in Switzerland and the UK, as well as funds totalling more than $240 million held across various bank accounts. These assets will be returned to 1MDB.

Despite the convictions, lawyers representing Mahony and Obaid, who had denied any wrongdoing, were not immediately available for comment. The case is closely tied to the actions of Malaysian financier Jho Low, who remains a fugitive. Low, an adviser to former Malaysian Prime Minister Najib Razak, played a central role in the scandal. The prosecution detailed how the executives, in collaboration with Low, extracted $1 billion from 1MDB in an initial venture. An additional $830 million was siphoned off between 2010 and 2011 through an Islamic loan arrangement.

Between 2009 and 2015, the convicted men laundered the stolen funds through Swiss bank accounts, using the money to acquire luxury properties, fine jewellery, and private equity investments. They also financed PetroSaudis operations and maintained extravagant lifestyles, prosecutors stated.

In 2023, 1MDB launched a lawsuit against Mahony, seeking to recover the $1.83 billion that had been embezzled. A spokesperson for 1MDB‘s board welcomed the court’s ruling, viewing it as an important step toward securing justice for Malaysia and recovering assets lost to corruption.

Investigators from Malaysia and the U.S. have estimated that a total of $4.5 billion was stolen from 1MDB, implicating figures such as Najib Razak and executives from Goldman Sachs. The U.S. Department of Justice has already helped return about $1.4 billion to Malaysia, with further efforts ongoing to recover remaining assets.

Public outrage over the 1MDB scandal played a significant role in the 2018 election, where Najib and his ruling party, the United Malays National Organisation, were defeated for the first time since Malaysias independence. Najib is now facing multiple trials related to the scandal.