Malaysia 1MDB scandal: Switzerland begins fraud trial of Saudi oil executives linked to sovereign wealth fund

The defendants, from PetroSaudi, are accused of having created a scheme in 2009 under which 1MDB, would set up a joint venture based on false premises

Swiss prosecutors said the executives were indicted on charges of commercial fraud. Malaysian investigators allege US$4.5 billion was stolen from the fund

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The Swiss Federal Criminal Court begins the trial of two Petrosaudi executives on embezzlement and laundering surrounding the Malaysian sovereign wealth fund 1MDB. Photo: AFP

Published: 6:18pm, 2 Apr 2024Updated: 8:02pm, 2 Apr 2024

Two managers of a Saudi oil exploration company went on trial in Switzerland on Tuesday for alleged fraud and money laundering over a scandal years ago linked to a Malaysian sovereign wealth fund that the US Justice Department once described as the “biggest kleptocracy case” ever.

The defendants from PetroSaudi – a Swiss Saudi citizen and a Swiss British national who were not identified by name for privacy reasons – are accused of having created a scheme in 2009 under which 1 Malaysia Development Berhad, or 1MDB, would set up a joint venture based on false premises.

Malaysian investigators allege that over US$4.5 billion was stolen from the fund, established in 2009, and laundered by associates of former Prime Minister Najib Razak through layers of bank accounts in the United States and other countries.

Swiss prosecutors said the PetroSaudi managers were indicted on charges of commercial fraud, aggravated criminal mismanagement and aggravated money laundering, based on events that took place over at least six years.

The attorney general’s office, in a filing last year, said the managers sought to enrich themselves and others by misappropriating at least US$1.8 billion that was transferred to the state-owned investment fund.

The indictments are the first of their kind in Switzerland, where some financial institutions were ensnared in the far-reaching scandal.

Whistle-blower Xavier Justo stands in front of the Swiss Federal Criminal Court at the opening day of the trial of two Petrosaudi executives on embezzlement and laundering surrounding the Malaysian sovereign wealth fund 1MDB. Photo: AFP

The joint-venture deal called for 1MDB to pour in US$1 billion and for PetroSaudi to contribute assets consisting of oilfields in Turkmenistan and Argentina valued at US$2.7 billion, even though the oil company didn’t actually own those assets, according to the criminal court in the southern city of Bellinzona.