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

by Tom Wright

He’d made his career from the desire of rich people to brag about their affluence; what made this guy want to spend so much cash in secret? he wondered.

Highlighted simply for the punctuation.

One recent estimate puts the money stashed in offshore financial centers since 1970 at $32 trillion—a figure equal to the combined economies of the United States and China—with hundreds of billions lost in tax revenues.

For only a few thousand dollars, a corporate-services firm like U.S.-headquartered Trident Trust or Mossack Fonseca of Panama would open an account or form a company, and deal with all the paperwork.

For the next step of his scheme, Low set up two shell companies in the Seychelles. The firms—ADIA Investment Corporation and KIA Investment Corporation—appeared, given their names, to be related to the Abu Dhabi Investment Authority, or ADIA, and Kuwait Investment Authority, or KIA, two of the most famous, multi-billion-dollar sovereign wealth funds in the world. But the look-alike companies were purely Low’s creation, with no links to Abu Dhabi or Kuwait.

Next, Low had these look-alike offshore companies take minority stakes in the Malaysian construction firms. It now would appear to any prospective business partner doing due diligence that royals from Kuwait and Malaysia, as well as Ambassador Otaiba, and two major sovereign wealth funds, were Low’s partners in plans to develop the Iskandar project.

His was a scheme for the twenty-first century, a truly global endeavor that produced nothing—a shift of cash from a poorly controlled state fund in the developing world, diverting it into the opaque corners of an underpoliced financial system that’s all but broken.

He knew that transactions between governments attracted less scrutiny from auditors and banks, and so he had set about building high-level connections in Malaysia, the UAE, and Saudi Arabia. He understood that once money was sent into an anonymous offshore account, it was difficult to trace, and he’d learned how to layer transactions—sending cash around in a whirl between shell companies. And to keep everything flowing, he constantly misrepresented money as investments or loans, giving his scheme a veneer of formality.

Now, Low wanted to get the money into the United States so he could spend it on luxuries and begin building his empire.

He opted to use the firm’s Interest On Lawyer Trust Accounts, or IOLTAs, to help distribute the money.

This arcane corner of the financial world came into existence three decades ago as a way for law firms to earn short-term interest on client money to finance legal aid for the poor, but over time the accounts developed a reputation for shielding the identity of clients in transactions and helping to hide the origin of funds.

While it is illegal for lawyers to abet money laundering, they are not required to report suspicious activity to regulators.

wire transfers leaving an IOLTA account generally denote only the name of a law firm, not that of the client, making it hard for correspondent banks to detect suspicious activity.

Park Imperial on 230 West Fifty-Sixth Street

At Goldman, both Blankfein and Gary Cohn, the bank’s president, who would go on to serve as President Donald Trump’s chief economic adviser, pushed subprime debt products, which the bank continued to market in the run-up to the crisis.

The collapse of the housing market had left many Americans destitute. Goldman’s profit, by contrast, soared to a record $13.4 billion

The transaction in Sarawak was the first time Leissner, the relationship banker, had joined forces with Vella, the derivatives whiz, to deliver a major amount of money to a client, quietly and fast, while making large profits for Goldman. It was a formula that would be central to Goldman’s future relationship with 1MDB.

There was one person, though, who didn’t need to comb through 1MDB’s financials to sense a fraud. And that person was Jordan Belfort.

Himself no stranger to fraud, Jordan Belfort thought something wasn’t right about this setup. The event must have cost at least $3 million, Belfort calculated, as he nibbled on canapés and watched the A-list entertainment. And the movie hadn’t even gone into production! “This is a fucking scam—anybody who does this has stolen money,” Belfort told Anne, as the music thumped. “You wouldn’t spend money you worked for like that.”

“Leo got sucked in,” Belfort later told Swiss journalist Katharina Bart. “Leo’s an honest guy. But I met these guys, and said to Anne, ‘These guys are fucking criminals.’ “I was like, ‘I don’t need these fucking people.’ I knew it, it was so obvious.”

Low’s ability to get this far was in part a result of the failings of compliance efforts at major financial institutions. Banks made money through letting transactions happen—not putting up roadblocks—and compliance officers were often pressured to turn a blind eye.

When corrupt organizations take over a country’s apparatus, whether in Russia, China, or Malaysia, its members feel emboldened. They are not common criminals but an elite, shielded by privilege from the normal reaches of justice.

At a meeting the next day, Sun Lijun, head of China’s domestic-security force, confirmed that China’s government was monitoring the Wall Street Journal in Hong Kong at Malaysia’s request, including “full scale residence/office/device tapping, computer/phone/web data retrieval, and full operational surveillance,” according to the Malaysian summary. “Sun says that they will establish all links that WSJ HK has with Malaysia-related individuals and will hand over the wealth of data to Malaysia through ‘back channels’ once everything is ready,” the summary reads. It was unclear whether China carried out its promises or was just stringing Low along.

The troubles at 1MDB offered a perfect opportunity for China to supplant the United States in Malaysia—just the latest sign of America’s declining power in the region.

Lynch laid out how the U.S. government was seeking to seize more than $1 billion in assets bought with proceeds stolen from 1MDB—the largest corruption case on record—from mansions in New York, Los Angeles, and London, to a stake in EMI, a private jet, and the future proceeds from The Wolf of Wall Street, to name just a few. For maximum publicity, the Justice Department filed its lawsuit—United States v. The Wolf of Wall Street—at the District Court for the Central District of California, where Hollywood is located.

Gary Cohn, Goldman’s president and a big supporter of the 1MDB business, became director of President Donald Trump’s National Economic Council in January 2017, a job he stayed in for a little over a year.

Jho Low, to whom they referred as “Wu Tang” in e-mail communications, had agreed to pay $300 million to the Delaware company if President Trump ended the 1MDB investigations, according to court filings.

Low used a Hong Kong shell company to wire $8.5 million to one of the Delaware companies controlled by Pras, the Justice Department alleged in court documents made public in late 2018. From there, the documents show, over $6 million flowed to the law firm owned by Broidy’s wife, which, in turn, passed on $1.5 million to Davis’s company. In December 2017, Larry Davis, Nickie’s husband, donated $100,000 to Trump Victory, a fund-raising committee for the president’s reelection in 2020, allegedly using the money sent by Low.

For the first time in the nation’s history, Malaysia’s opposition was in power.

Police raided Kuala Lumpur apartment units owned by Najib’s family and carted out $274 million worth of items, including 12,000 pieces of jewelry, 567 handbags, and 423 watches, as well as $28 million in cash.

The money he took, by and large, was not stolen directly from Malaysia’s treasury or through padded government contracts. Instead, it was cash that 1MDB borrowed on international financial markets with the help of Goldman Sachs.