Why is Malaysia’s 1MDB scandal still casting long shadow over its economy?

Seventy per cent of the US$10 billion stolen from Malaysia in the 1MDB corruption scandal has been recovered by Malaysia, the country’s anti-corruption agency announced on Monday, following the return of US$3.2 million in assets from associates of Jho Low, the scheme’s larger-than-life alleged mastermind.

Nearly seven years after the scandal unravelled with Low’s co-conspirator and former Prime Minister Najib Razak losing in the 2018 election, Malaysia is still seeking to recover its stolen assets linked to the sovereign wealth fund.

Authorities say the nation faces formidable legal and financial hurdles as it hunts down the balance of pilfered funds to settle 1MDB-linked repayments, which the country is burdened with until 2039.

Background

What began as a government initiative to drive economic development through global partnerships became one of the largest financial frauds in history. Instead of boosting investment in Malaysia, 1MDB turned into a conduit for massive corruption and money laundering, with over 42 billion ringgit (US$9.45 billion) siphoned off.

Among the most extravagant purchases was a US$250 million 300-foot yacht Equanimity for Malaysian businessman Jho Low’s personal use. Seized in Indonesian waters and later sold to recoup losses, it became a symbol of the scandal’s excesses. Even more audacious was the use of stolen 1MDB funds to finance The Wolf of Wall Street, American director Martin Scorsese’s film about financial fraud and corporate greed.

Low’s lavish spending extended to giving diamond jewellery to Australian model Miranda Kerr and organising extravagant parties attended by celebrities, including American socialite Paris Hilton.

In June 2024, he and his family returned US$100 million worth of artwork – including pieces by famous artists Andy Warhol and Claude Monet – along with a luxury apartment in Paris as part of a settlement with US authorities. The assets were liquidated and repatriated to Malaysia.