COMMENT | The US$3.9 billion deal with Goldman Sachs by Malaysia is the second consecutive lousy deal over 1Malaysia Development Bhd, or 1MDB, following upon the rotten one the prosecution made in Najib Razak’s stepson, Riza Aziz’s money laundering case. Here’s why.

That so-called settlement is not worth US$3.9 billion - the cash sum is just US$2.5 billion. The remaining US$1.4 billion is a guarantee by Goldman Sachs that at least that sum will be obtained by ongoing efforts to recover monies embezzled from the three, US$6.5 billion, in bonds that Goldman had arranged for Malaysia in 2012 and 2013.

With intensive moves by the US Department of Justice (DOJ), which published a report showing money trails of how over US$4.5 billion was stolen from 1MDB, to recover assets in the US bought with the loot, and similar efforts elsewhere, it is very likely that much more than US$1.4 billion will be recovered eventually.

That means Goldman will most likely not have to fork out a cent for this effective put option it has written which gives Malaysia the right to sell assets at an agreed price by an agreed date. The option will expire worthless for Malaysia and the effective settlement will be US$2.5 billion.

It is a pity that newly-minted Finance Minister Tengku Zafrul Aziz obfuscates this important point in his statement. He goes on about how “this settlement represents a significant increase compared to the previous offer of US$1.75 billion made by Goldman Sachs to the previous administration in 2019”.

He failed to mention that in 2018, under the previous administration, Malaysia had filed criminal charges against Goldman over its role as underwriter and arranger of the bonds. Criminal charges were pressed against 17 current and former directors of Goldman units. Zafrul’s predecessor, Lim Guan Eng was quoted as having said that the government wanted US$7.5 billion in settlements...