Billion Dollar Whale: The Man Who Fooled Wall Street, Hollywood, and the World

by Tom Wright

his real expertise lay in an intricate knowledge of ways to help elite customers reduce tax bills. The bank’s bread and butter—like many private banks in Singapore—was devising such strategies, largely for rich Indian and Southeast Asian clients. One method Yeo employed was to wash clients’ money through investment funds in faraway places.

was unclear why a state fund such as 1MDB would use such secretive financial structures, but Pinto didn’t pry, as BSI had vouched for 1MDB. As Kevin Swampillai, Yeo’s boss, put it: “There was only a semblance of compliance at these funds.” In the next couple of years, Amicorp would set up $1.5 billion of such structures for 1MDB, Low, and his family.

Instead of paying in cash, Bridge Partners set up a Cayman Islands investment fund, effectively giving 1MDB units in the fund in return for the stake. The fund, called Bridge Global, had only one client—1MDB—and hadn’t even registered with authorities in the Cayman Islands for permission to make investments. Magically, 1MDB now claimed in its financial statements the Bridge Global investment was worth $2.3 billion—a profit of $500 million on the money it had lent to PetroSaudi.

The problem was that 1MDB had never issued a U.S. dollar bond to international investors, and it had no credit rating. So, Goldman was suggesting it ask IPIC—a sovereign entity with a strong credit rating—to guarantee the issue. That would put investors at ease, giving them confidence that 1MDB would be able to repay the debt whatever the circumstances. In return for its guarantee, IPIC would acquire the rights to buy a stake in the listed power company at a favorable price.

But there were many oddities in the plan. Why would a Malaysian state fund seek a guarantee from a similar fund of another country? Why didn’t Malaysia’s government just offer a sovereign guarantee for the debt?

IPIC was fueled mainly by debt. By 2012, it had $19 billion in borrowings, and only the Abu Dhabi government’s 100 percent ownership ensured its debt was awarded investment-grade credit ratings. The fund’s image as a major investor, in fact, was partly a mirage.

Typically, most companies issuing bonds prefer to do so through a public issuance, in which the bank arranging the deal canvasses a wide range of investors. Through this process, called book building, banks with access to a large network of investors can reduce a company’s cost of funds. Investors in a private placement, by contrast—typically big institutions like pension funds or hedge funds—demand higher returns.

The whole notion of “monetizing the state”—in countries without rule of law and sophisticated investors—risked costing taxpayers in poor places for the benefit of Wall Street.

Aabar Investments Ltd. was meant to look like Aabar Investments PJS, a subsidiary of IPIC. 1MDB would later claim, in its audited financial statements, that the $576 million transfer was part of a payment to compensate the Abu Dhabi fund for its guarantee of the bond.

Known to only a handful of insiders at the time, the money fanned out from the look-alike Aabar to a small set of beneficiaries connected to the deal. In total $1.4 billion was diverted.

Low had taken graft to new levels, risking Malaysia’s financial stability. The 1MDB fund’s debt stood at a whopping $7 billion, and it had few assets to show for the huge borrowings.

In the first two stages of the heist, Low had simply taken about $3 billion—and spent wildly. Now, he was aiming to build a real business,

“If you guys are so scared, then don’t be private bankers. Private bankers must take some risks. If not, go back and breast-feed your children,”

In a presentation for 1MDB and Aabar, Goldman set forth what it understood its client’s key objectives to be in the deal making. They included “maintenance of confidentiality during execution” and “speed.” In other words, this was to be a fast and secret deal—although no one at 1MDB ever bothered to explain why these conditions were necessary. Indeed, Goldman’s prospectus for the bond even stressed to would-be investors that the 1MDB-Aabar joint venture company didn’t even yet have a well-defined business plan.

In total, over just twelve months, the bank had earned nearly $600 million from selling three bonds for the 1MDB fund—two hundred times the typical fee.

holy kaw!!!

March 2013, Jho Low sent a BlackBerry message to Joanna Yu, an employee at AmBank in Kuala Lumpur, warning her that “681 American pies” would soon be arriving from overseas into an account known as “AMPRIVATE BANKING—MR.”

The country’s best minds increasingly were leaving, preferring a life in New York or London over the struggles in Malaysia. It was the kind of brain drain that had stunted the growth of nations from India to Indonesia, whose most ambitious citizens gave up on their troubled homeland and sought a better life elsewhere.

With national income of $10,000 per person, a fifth of the United States’s level, Malaysia was stuck in the middle-income trap, no longer poor but not yet rich.

But he did not display the works or appreciate them. Art had an advantage over other assets: It was hard to trace and could be turned into cash in an instant. Low needed somewhere secret—and safe—to house his new collection.

The Financial Action Task Force viewed the art world, much like the jewelry trade, as one of the last great unregulated financial markets in the world.

In all, between May and September 2013, Low, via Tanore, bought $137 million in art.

by the end of the year he possessed art worth an estimated $330 million. He stashed it all in the Geneva Freeport and then set about covering up the evidence of how it had been financed. To do that, Low wrote a series of letters—supposedly from Eric Tan—offering him the artworks bought by Tanore as a gift.

After the elections, Najib wired back $620 million to Tanore, and some of that money ended up in an account held by Blackrock at DBS Bank of Singapore.

Why?

Low invested $50 million in the deal, with Cepsa funding the remainder of the purchase price. One week later, Cepsa transferred $350 million into Low’s shell company, ostensibly to buy out Low’s share in the partnership. He had made 600 percent on his money in a matter of days.

“This is an indictment of all of Wall Street. But it’s an indictment about something that’s in our culture, this incessant need to consume and this incessant need to obtain more and more wealth with complete disregard for anyone except yourself,”

Low wagered, there would be oodles of cash to put back into 1MDB.

Between April 2013 and September 2014, Low used the Blackrock account to purchase $200 million in jewelry from across the globe:

With $10 billion in debt and only $20 million in cash, the fund was in dire straits, hemorrhaging tens of millions of dollars a month,

Auditors are meant to be independent, but Tan offered for Deloitte to help 1MDB with its media relations.

With barely any business, and encumbered by huge borrowings, the only way for 1MDB to avoid a financial loss was to again revalue its land portfolio and book the profits, as it had done in 2010. In this way, 1MDB was hoping to show a $260 million profit.

the board was adamant that 1MDB’s management repatriate the Cayman Islands money, to help slash the fund’s debt and to show the Edge newspaper and other critics they were wrong. Only Low, and perhaps a few associates like Al Husseiny and Yeo, knew the truth: There was no money in the Cayman Islands.

As the night of gambling at the Palazzo wound up at sunrise, Low handed the casino staff a tip of $1 million, one of the largest ever at the establishment.

The fund was in grave danger. In just two months, it had lost $140 million under the weight of hundreds of millions of dollars in interest costs.

That was how run-of-the-mill graft worked in Malaysia: The government overpaid for an asset, and the seller made backhand contributions to UMNO, while politicians lined their pockets.

As soon as 1MDB got its hands on the Deutsche Bank loan, the fund’s management sent the money to the look-alike Aabar, the same vehicle Low and Al Qubaisi had used to divert cash in 2012. At this critical stage, Low could have deployed these funds to fill financial holes, especially the nonexistent cash in the Cayman Islands. Instead, he used the bulk of the money to pay for the superyacht, which was delivered in the summer.

Low was straining to pay for all this opulence. Although some $5 billion had come out of 1MDB, the scheme had so many tendrils—so many payments to conspirators and business partners, and to keep up a billionaire’s lifestyle—he was often hustling for cash.

As bills piled up, Low began to miss payments, including legal bills and salaries for the crew of Equanimity, forcing him to use his vast art collection as collateral for a loan from Sotheby’s Financial.

He had already taken money from a Deutsche Bank loan to 1MDB in May—a late-stage flow of money that could have gone to shore up 1MDB’s finances—and spent it on the Equanimity.

Low looked for a way out. How could they turn a few hundred million dollars—the remainder of the Deutsche Bank money not used for jewelry and other purchases—into $2.3 billion?

The idea was to transfer a portion of cash from the latest Deutsche Bank loan into the Cayman Islands fund. From there, 1MDB would then “redeem” this money, but immediately send it into a series of offshore vehicles set up by Amicorp, until the cash ended up back at the Cayman Islands fund. From here, 1MDB could again “redeem” the money. It was the same cash going in circles.

The perpetrators sent a chunk of a few hundred million dollars through this cycle, and then repeated the process five more times, making it look as if 1MDB had redeemed $1.5 billion of its nonexistent Cayman Islands investment.

he kept sending the associate with sacks of cash—literally bundles of notes in bags—to AmBank branches. The deposits totaled only $1.4 million, but handing money over the counter like this had set off anti-money-laundering alerts at AmBank, and Ramamurthy was forced to act. The chief executive alerted the AmBank board and Bank Negara Malaysia, the central bank. Low was furious.

Cheah had informed Zeti Akhtar Aziz, the sixty-seven-year-old governor of Bank Negara, about the prime minister’s account in 2011. He told her Najib was expecting inflows of hundreds of millions of dollars in political donations from Saudi Arabia

Protected in his bubble, served by sycophants, Low foremost among them, Najib was among the few who didn’t know the noose was tightening, and he ordered that his accounts remain open. The prime minister needed to keep his wife happy.

In the Chanel store, her items selected, Rosmah turned to Najib to pay. The prime minister whipped out his platinum credit card, with a $1 million limit, and handed it to the cashier. A moment later, a nervous Chanel employee informed Najib that the transaction was not going through. Annoyed, he tapped out a message to Low on his cell phone. The credit card drew from his AmBank accounts, which were funded by 1MDB money.

After an awkward wait in the Chanel store, eventually the credit card machine burst into action, charging the Malaysian people another $130,625 for Rosmah’s frivolity.

Since 2008, Rosmah had spent at least $6 million using credit cards—her husband’s, but also others in her own name

just before Christmas Day in 2014, Low took a drastic step, ordering senior executives at the fund to destroy all documents at 1MDB’s headquarters

This demand, however, to erase the data of a multi-billion-dollar sovereign wealth fund reeked of desperation. Lower-level employees were told to bring their laptops and cell phones to the IT department, where staff wiped them clear of all data. Even information on the fund’s mainframe computer was obliterated.

Over the years, he exhibited an inhuman tolerance for risk. The flipside was that Low rarely looked to the future: He had no contingency plan, no idea of how to get out of this mess, and now he was panicked.