The Federal Reserve on Tuesday banned two former Goldman Sachs executives from working in the banking industry because of their roles in a multibillion-dollar fraud involving a Malaysian government investment fund.
One of the executives, Tim Leissner, who was one of Goldman’s top investment bankers in Asia, has pleaded guilty in a federal criminal investigation of the fraud and has been ordered to forfeit about $44 million. The other executive, Roger Ng, has been charged in the United States with participating in money laundering and bribery. His lawyer has said that he plans to plead not guilty after he is returned from Malaysia, where he is being held on charges in that country.
Goldman Sachs helped the fund, 1Malaysia Development Berhad, or 1MDB, sell more than $6 billion of debt to investors, ostensibly for projects that would benefit the Malaysian people. But federal prosecutors contend that at least $2.7 billion of that money went to fuel the lavish lifestyles of several people close to the former Malaysian prime minister, including the flamboyant financier Jho Low.
Mr. Low, who also has been charged in the United States and Malaysia, attended at least two meetings where Lloyd Blankfein, the former Goldman chief executive officer, was present.
But Goldman Sachs has painted Mr. Leissner as a rogue operator who bears the responsibility for the bank’s role in the scandal. The bank has said that it took steps to make sure that neither Mr. Low nor any other intermediaries played a role in arranging the 1MDB financing deals.
[Read more about Goldman Sachs’s efforts to distance itself from Mr. Leissner.]
“Given the Department of Justice’s charges last year, this development is hardly surprising,” said Jake Siewert, a Goldman spokesman.
Federal prosecutors and banking regulators have continued to investigate Goldman’s role in the scandal. The bank has said it faced the prospect of a significant fine to resolve the matter.
In addition to permanently banning Mr. Leissner from the banking industry, the Fed fined him $1.4 million. Banking authorities in Singapore barred Mr. Leissner from working in that country late last year.
Representatives for Mr. Leissner and Mr. Ng did not immediately respond to requests for comment. Mr. Leissner has been free on bail and was scheduled to be sentenced on June 28.
Investigators in the United States have said 1MDB was raided by the former Malaysian prime minister Najib Razak and other officials, including Mr. Low, with billions of dollars in siphoned funds used on luxuries including diamonds, designer handbags and fine art, and to help finance the Hollywood film “The Wolf of Wall Street.”
Mr. Najib was ousted in last year’s election and charged by Malaysian prosecutors with money laundering in August.
Mr. Low, who remains at large, is believed to be staying in China.