Billion Dollar Whale

Remember that Leonard DiCaprio movie about financial malfeasance, "The Wolf of Wall Street"? Well, turns out that in our modern, through-the-looking-glass world, that film was financed with dirty money from the biggest financial heist of our decade! "Billion Dollar Whale" details an extravagant criminal entreprise that criss-crosses the globe and pulls Hollywood celebrities, prime ministers, Goldman Sachs bankers, and even Miranda Kerr - now wife of Snapchat bro Evan Spiegel - into its corrupting vortex. Wright and Hope help us track the ascent of Malaysian con-man Jho Low and unravel the complex financial chicanery that enabled him to siphon more than 5 billion dollars from the Malaysian sovereign wealth fund. Brazen deception, bribery, well-paid complicity, and offshore finance all play vital roles in this drama. At one point, Jho Low straight up makes an offshore account called "Blackstone Asia Real Estate Partners" to deceive his partners into thinking that they're putting money into Blackstone when they're actually just lining his pockets. You can't make this stuff up.

This book deepened my conviction that offshore finance and pools of dark money are one of the greatest threats to good governance. Jho Low was a master at hiding money overseas (see Treasure Islands for more on offshore finance) and the authors help us understand the complex money trail that obscures a simpler story. As I see it, Jho Low got Najib Razak (Malaysia's Prime Minister) to sell out his country. Razak handed over the reins of Malaysia's sovereign wealth fund (1MDB) to Jho Low in return for over a billion dollars of secret kickbacks to his personal bank account and the ability to draw on 1MDB as a political slush fund. Jho Low then partnered with Tim Leissner at Goldman Sachs to raise billions in international markets by selling bonds that relied on the underlying credit rating of Malaysia as a sovereign state (reminds me of Robert Moses in The Power Broker). Low used the proceeds as his personal piggy bank to fuel a partying and spending spree reminiscent of the Gilded Age. And of course, Goldman Sachs was well-compensated for its efforts to "monetize the state," as the company calls it internally.

As in the Theranos saga (see my review of Bad Blood), Jho Low's fraud was publicly exposed in the Wall Street Journal - an insitution which deserves some serious credit for breaking two of the biggest financial scandals this decade. Like Holmes, Low also turned to the flexible attorneys at Boies, Schiller & Flexner to defend himself. Funny to see the same names come up again and again...

And of course, no one is doing any jail time for this. Malaysia's political elite mortgaged the future of their country and left their citizens to foot the bill. It's disgusting. And while the US is now shunning Malaysian corruption, the Chinese government has slid right in to fill the gap (just like the dynamic The Looting Machine describes in Africa). What a world.

My highlights below.

Authors’ Note

Media reports—and sources we began speaking to—suggested that Jho Low, a little-known, twenty-seven-year-old associate of the prime minister, had himself taken the money, possibly hundreds of millions, if not billions, of dollars, and used it to build a Hollywood production company, commission one of the world’s grandest yachts, and throw wildly decadent parties around the globe. If true, the Low affair would represent one of the greatest financial heists in history.

Behind the plain outward appearance and mild manners of Low was a serial fabulist who figured out how the world really works.

As of this writing in July 2018, no public charges of criminal wrongdoing have been filed against Jho Low or most of the major characters in the book, with the exception of former Malaysian Prime Minister Najib Razak.

Prologue

Some celebrities had received hundreds of thousands of dollars in appearance fees from Low just to turn up at his events, and they were keen to keep him happy.

Casino operators and nightclubs refer to their highest rollers as “whales,” and one thing was certain about Low: He was the most extravagant whale that Vegas, New York, and St. Tropez had seen in a long time — maybe ever.

Then, a giant faux wedding cake was wheeled on stage. After a few moments, Britney Spears, wearing a skimpy, gold-colored outfit, burst out and, joined by dancers, serenaded Low with “Happy Birthday,” as a troupe of women began doling out slices of real chocolate cake. Each of the performers earned a fat check, with Spears reportedly taking a six-figure sum for her brief cameo.

Armed with more liquid cash than possibly any individual in history, Low infiltrated the very heart of U.S. power.

PART I - THE INVENTION OF JHO LOW

Chapter 1 - Fake Photos

Low’s grandfather washed up in Penang in the 1960s from China, by way of Thailand, and the family had built a small fortune. They were a wealthy clan by any standard, but Low recently had begun attending Harrow, the elite boarding school in England, where some of his classmates counted their families’ wealth in billions, not mere millions.

Larry’s shares in the garment company, which he recently had sold, were worth around $15 million — a huge sum in the Southeast Asian nation, where many people lived on $1,000 per month.

There were dark rumors in George Town’s close-knit community about the origin of Meng Tak’s money. Some old-timers remembered him running a cookware shop in the city. But perhaps the story about iron-ore mining in Thailand was only part of the truth. Others whispered that he’d made money smuggling opium over the border.

Born in Thailand in 1952, Larry Low moved as a young child to Penang and went on to study at the London School of Economics and the University of California, Los Angeles, for an MBA.

In the early 1990s, he was involved in an acquisition by MWE, the garment company in which he owned a minority stake, of a Canadian technology firm. The deal overvalued the target firm, and Larry arranged for some of the excess cash to go into an offshore bank account he controlled.

The younger Lows learned from their father about this world of secret finance, and May-Lin, Low’s sister, became a lawyer with an expertise in offshore vehicles.

Flush with cash, Larry, now in his forties, indulged his desire to party. For one celebration on a yacht, he arranged for Swedish models to fly into Penang, the kind of arrangement for which his son later would be known.

For decades, Harrow, situated on a bucolic hill to the northwest of London, had churned out British prime ministers such as Sir Winston Churchill, but by the late 1990s it was attracting new money from Asia and the Middle East.

He knew that Malaysian politicians like Riza’s stepfather, paid only moderate official government salaries, could never afford to live in multi-million-pound homes in London’s toniest district. Everyone was aware that Malaysia’s ruling party, the United Malays National Organization, demanded kickbacks from businesses for granting everything from gambling licenses to infrastructure contracts. Many of those businesses were controlled by Chinese Malaysians, like the Lows. The situation stirred in him a moral relativism. If everyone was taking a cut, then what was the problem?

Chapter 2 - Asian Great Gatsby

He intuitively understood that people desire to feel important, part of an exclusive club, and he played on it. “Fashionable attire is a must. No jeans or sneakers,” the invites read.

Chapter 3 - Win Tons of Money

One of at least twelve children, from different wives, of Abu Dhabi’s former oil minister, Otaiba had a privileged upbringing, attending the Cairo American College in Egypt — his mother’s country — before studying at Georgetown (where he attended four years but did not graduate), and later, at Washington’s National Defense University. Eloquent and charming, he positioned himself back home as an interpreter of the West for the emirate’s royal family. At age twenty-six, he became an adviser to Abu Dhabi’s crown prince, Mohammed Bin Zayed Al Nahyan, and he assumed the role of national security liaison with foreign governments. Otaiba was always dressed impeccably in a Western business suit, and he had a perfect American accent, so officials in Washington often forgot he was a foreigner, and the young emirati became a trusted ally during the George W. Bush era.

While well versed in Arab politics, Otaiba was a novice at business. To make money, he became involved with a construction company set up by a partner. The pair co-invested in projects in the Middle East, but Otaiba remained in the shadows: His main contribution to the business was to provide wasta, or “connections” in Arabic.

Mubadala was part of a trend in which rich states were playing a greater role in the global economy. Sovereign wealth funds had been around since the 1950s, when Saudi Arabia and Kuwait set up entities to find ways to invest their oil wealth with a long-term outlook. Other examples followed, from Norway’s Government Pension Fund to the Abu Dhabi Investment Authority, the emirate’s main wealth fund. By Low’s visit, sovereign wealth funds controlled $3.5 trillion in assets, larger than the annual GDP of most Western nations.

Back at Wharton for his final semester, Low set up his first company, the British Virgin Islands–based Wynton Group. The name stood for “win tons” of money, he told friends, who were unsure if it was a joke.

Chapter 4 - We’re Going to Need a Bigger Van

As the heir to a Malaysian political dynasty — his father and uncle had both been prime ministers — Najib and his wife were accustomed to a retinue of handlers who looked after their every need.

From then on, the boys, and especially Najib, were enveloped in the privileged bubble of the ruling United Malays National Organization, or UMNO.

UMNO had ruled Malaysia since its independence from Britain in 1957. Malaysia held regular elections, but the system was deeply flawed and corrupt. In the 1970s, Najib’s father ushered in policies whose effect was to help Malays, the majority ethnic group. The government reserved university places for Malays, gave special financial handouts to Malays, and even favored Malay-owned companies for state contracts. By 2007, these policies had spawned a thick web of graft in which businesses, many controlled by Chinese and Indian Malaysians, had to pay kickbacks to the likes of Najib and Rosmah in order to operate.

To finance her penchant for luxury items, Rosmah was pilfering the state coffers. One Malaysian businessman detailed how it worked: He would buy properties from state-owned companies before selling them at a markup to other state firms, sharing the profit with Rosmah.

Only the best-known Malaysian firms could afford an office in the towers. Chief among them was Petronas, the state oil company, whose profits had fueled Malaysia’s economic transformation.

Low was becoming adept at obtaining meetings with powerful figures, putting himself in the room even though he had no track record.

Buoyed by sky-high oil prices, Mubadala had taken sizable minority stakes in firms like Ferrari and Advanced Micro Devices, and Al Mubarak controlled a multi-billion-dollar empire.

In 2007, Low formed an offshore company for Rosmah and Najib to help pay for their daughter’s expenses while studying at Georgetown.

Low had expected to make serious money for himself from the deal, and he was incensed when Khazanah turned down his request to be paid a broker fee. Run by professionals, the fund was too clean for Low’s purposes. Going forward, he really needed to control his own pot of investment money. To do so, Low prepared to dive deeply into the world of offshore finance.

Chapter 5 - A Nice Toy

Otaiba had reason to keep his dealings with Low under wraps. A few months earlier, he had become the UAE’s ambassador to the United States, fast establishing himself as one of Washington’s most prominent diplomats.

As a vehicle to make the purchase, Low set up a British Virgin Islands entity called the Abu Dhabi-Kuwait-Malaysia Investment Company and gave free shares to Ambassador Otaiba and minor aristocrats from Kuwait and Malaysia. He was creating the impression that prominent individuals were behind the company. With such illustrious backing now in place, Low had no trouble persuading Malaysian banks to lend tens of millions of dollars.

Low knew about offshore financial centers from his father, Larry, who had a myriad of overseas accounts. It was normal for rich Asians, fearing instability at home, or just to evade taxes, to set up offshore accounts in secretive jurisdictions like the British Virgin Islands and the Cayman Islands.

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. (The Panama Papers, a leak in 2016 of hundreds of thousands of Mossack Fonseca client records going back to the 1970s, showed the extent of the use of offshore accounts by the global elite, from the family of Chinese president Xi Jinping to actress Emma Watson.)

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.

The company issued just one unregistered share, valued at $1, and it was controlled by whoever physically held the stock certificate. These “bearer shares” were banned in many jurisdictions, including Great Britain and the United States — Nevada and Wyoming in 2007 became the last states to abolish their use — because they allowed owners of companies to hide behind layers of secrecy and made it nearly impossible for regulators to determine the owner of an asset at a given point in time.

But in the Seychelles, Low learned, they were still permitted.

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.

He found one in Taib Mahmud, the seventy-one-year-old chief minister of Sarawak, a remote, jungle-covered Malaysian state on Borneo Island, separated from the rest of the country by hundreds of miles of sea. Short and elfish, with silver-gray hair, Taib was one of Malaysia’s richest individuals — the product of decades in businesses such as logging and palm-oil plantations that had led to the deforestation of his state.

A few months later, Wynton, Low’s company, completed the sale of its stake in the Iskandar land to UBG, a holding company controlled by Chief Minister Taib, in return for cash and shares. The deal made Low the largest shareholder of UBG. He crowed to friends that the sale had netted a $110 million profit for Wynton by selling to Taib at a significant markup.

Chapter 6 - Doctor Leissner, I Presume

Hank Paulson, who had just left the chief executive role, had steered Goldman deep into China, where it made money advising the Communist government on how to privatize companies and became one of the first foreign banks to set up a local securities joint venture. Paulson had quit weeks earlier to become President George W. Bush’s Treasury secretary, and Blankfein was keen to keep the focus turned on Asia.

Ahead of the financial crisis, Asia accounted for only around a tenth of Wall Street’s profits, of which China was a major driver.

Low had told Leissner about the sultan’s plans to set up an investment fund to manage his state’s oil and gas wealth. The sultan, Low had said, wanted to hire Goldman. A good talker, Leissner knew how to charm Asian dignitaries, and he hit it off with the sultan. By the end of the meeting, Goldman had clinched a contract to advise on the formation of the new fund, which was to be known as the Terengganu Investment Authority. Goldman’s fee for setting up the authority was a paltry $300,000—a sum barely worth getting out of bed for, by Wall Street’s standards. But Leissner knew how to play the long game. The Terengganu deal was the beginning of a line of business that in short order would earn hundreds of millions of dollars for Goldman. Suddenly, the one-time backwater of Malaysia would become one of Goldman’s biggest profit centers anywhere in the world.

In 1993, while employed at J.P. Morgan, Leissner acquired a doctorate in business administration from the University of Somerset. The college, which closed down a few years later, was known for selling degrees for a few thousand dollars, especially to Americans looking to burnish their credentials with a certificate from a serious-sounding British institution. Leissner began using the title “Dr.” at speaking engagements and soon after he secured a promotion to vice president at J.P. Morgan.

Shortly after Leissner joined, Goldman moved its Asian headquarters into gleaming new offices in Hong Kong’s Cheung Kong Center, a seventy-floor skyscraper with breathtaking views of the Peak, a mountain that towers over the central financial district, and Victoria Harbor, a busy sea channel separating Hong Kong island from the mainland. One floor had meeting rooms adorned with multi-million-dollar Chinese art, including ancient calligraphy and ink drawings of mist-shrouded mountains. An antique terra-cotta horse donated by Li Ka-shing, the Hong Kong billionaire who owned the building, stood inside the reception area.

Then, in May 2006, Leissner beat out other banks to snag a role advising on Malaysia’s largest-ever corporate takeover, a $2 billion deal for a local power company. Goldman’s fee on the deal, $9 million, was respectable, even by U.S. norms, and much fatter than run-of-the-mill Malaysian payouts.

Goldman colleagues noticed how Leissner had an uncanny ability to make clients feel like they had a deep, personal connection with him. He was a relationship banker, skilled at reeling in important executives through a kind of personal magnetism, rather than a “structuring guy,” one of the mathematical whizzes who priced and sold complex derivative products.

As Goldman Sachs ramped up its Asia business under Hank Paulson and now Lloyd Blankfein, Tim Leissner was a beneficiary. In October 2006, he made partner, one of 115 staff that year to be invited into Goldman’s inner sanctum. The bank kept the partner pool to only a few hundred people, or no more than 2 percent of its thirty thousand full-time employees, and those anointed were personally called by Blankfein. The honor came with a pay bump, to a base salary of almost $1 million, and access to larger bonuses and proprietary investments — deals that Goldman’s top bankers reserved for themselves.

And there was his string of affairs, which struck some colleagues as unprofessional. He didn’t so much engage in one-night stands as fall in love easily, floating from one serious relationship to another.

After this initial success, Low now suggested a more ambitious investment plan to Mizan. Why didn’t the sultan set up a sovereign wealth fund, based on Abu Dhabi’s Mubadala, which borrowed money against the state’s oil wealth? Low said he knew bankers at Goldman who could advise and tap global investors, creating a huge war chest for the state to fund development. To buy legitimacy, Low also needed the involvement of Goldman, and Leissner, despite his initial concerns about the young Malaysian, was eager for the business.

Chapter 7 - Saudi “Royalty” (The First Heist)

In the few months since Najib became prime minister, he and Low had spoken frequently. Low had convinced Malaysia’s new leader to focus on the Middle East.

In Abu Dhabi, after a dinner with the crown prince at the sumptuous Emirates Palace hotel, Najib announced the formation of a new Malaysian sovereign wealth fund to be called 1Malaysia Development Berhad, or 1MDB. The 1MDB fund was simply the Terengganu Investment Authority, which had recently raised $1.4 billion in Islamic bonds, transformed into a federal entity. The 1MDB fund would be responsible for repaying the bonds.

But he had another selling point, one which Najib, who was ambitious, found extremely attractive: Why not also use the fund as a political-financing vehicle? Profits from 1MDB would fill a war chest that Najib could use to pay off political supporters and voters, restoring UMNO’s popularity, Low promised.

On the surface, such spending by 1MDB would be packaged as “corporate social responsibility,” to borrow a phrase from the corporate world. The fund’s charitable arm would award scholarships and build affordable housing in areas where UMNO needed votes.

Prince Turki was just the kind of figure Jho Low was seeking out: a bona fide Saudi royal to dazzle the newly installed Prime Minister Najib, but one whose need for cash made him malleable.

Chapter 8 - Hitting a Gold Mine

One name was missing from the list of positions, however: Jho Low. Low decided to take no official role, but in truth, he was behind every decision.

Chapter 9 - “I Feel the Earth Move”

As it was a dollar transaction, the money needed to pass through a U.S. bank. Under American anti-money-laundering laws, these correspondent banks are obliged to check the source and use of funds.

When pushed, Shahrol Halmi, the fund’s chief executive, acknowledged the account was owned by a Seychelles company called Good Star Ltd. “Good Star is owned 100% by PetroSaudi International Ltd,” he wrote. Shahrol was parroting what Low told him. In truth, Good Star was another bearer-share company, the kind made illegal in many jurisdictions, and its single share was held by Jho Low, who also was signatory to its accounts. Only months before, he had set up the shell company, using the services of a trust company. It was a simulacrum of a bona fide business, a front the perpetrators hoped would shield them from detection.

Low had carried off a move so brazen, it was hard to fathom how no one had stopped him.

From Good Star’s account at Coutts, Low distributed money among the group. In early October, he transferred $85 million to Tarek Obaid’s J.P. Morgan account in Switzerland, under the pretense the amount was a private-equity investment. Coutts permitted the transfers, and three months later the bank similarly let through another payment of $68 million from Good Star to Obaid. Weeks after, Obaid paid $33 million to Patrick Mahony, and over 2009 and 2010, sent $77 million from his account to Prince Turki. Months later, Buckland, the White & Case lawyer, left the firm to take a new position as in-house counsel at PetroSaudi UK. Low had pulled off his first major heist, and even after paying off his partners, enjoyed virtually sole control over hundreds of millions of dollars.

PART II - OVERNIGHT BILLIONAIRE

Chapter 10 - An Evening with the Playmates

Someone took off DiCaprio’s baseball cap and wore it. But there wasn’t really a party atmosphere. The actor was in the process of filming Inception, a science fiction film, and, to some of the models, he still seemed to be in character, focused and distant. DiCaprio drank some bourbon, but there wasn’t much alcohol flowing.

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.

Now, Low wanted to get the money into the United States so he could spend it on luxuries and begin building his empire. That was risky, because the United States had started clamping down on corrupt foreign officials buying assets in Western nations. To do so, Low turned to Shearman & Sterling.

Lawyers, unlike bankers, don’t have to conduct due diligence on a client. Details of transfers through IOLTAs, meanwhile, are protected by lawyer-client privilege. While it is illegal for lawyers to abet money laundering, they are not required to report suspicious activity to regulators. The Financial Action Task Force, a Paris-based intergovernmental group that sets standards for stopping fraudulent use of the global finance system, has highlighted the United States’s poor oversight of lawyers as a weak spot in its defenses against money launderers.

Between October 2009 and June 2010 — a period of only eight months — Low and his entourage spent $85 million on alcohol, gambling in Vegas, private jets, renting superyachts, and to pay Playmates and Hollywood celebrities to hang out with them.

It’s a little-discussed secret that even the biggest movie stars take payment to attend events, and Low began to seek out the managers of top actors, or pull on the Strategic Group’s network of club promoters, to get celebrities to his parties. The rumor that Low was a billionaire with unlimited funds made him an attractive person to know. Even for DiCaprio, one of the world’s top-paid actors, with a sizable fortune of his own, the scope of Low’s purported wealth was alluring.

Chapter 11 - Raining Cristal

Hilton brought along a friend called Joey McFarland, a native of Louisville, Kentucky, who had moved to LA a few years before and began helping his friends out in a business that hired stars for parties and events. Tall with short-cropped blond hair and an approachable, open manner that reflected his Southern upbringing, McFarland got to know Hilton through the talent-booking business.

Nonetheless, a connection had been made, and over the coming weeks Low, Riza, and McFarland got talking about an idea. Why not leverage Low’s money to get into the film business? The rise of McFarland and Riza in the filmmaking world would be unexpected and meteoric. As he reinvented himself, McFarland soon would be disavowing his talent-booking past, even to those closest to him.

Chapter 12 - How to Spend a Billion

The success of Low was by now important to Abu Dhabi on multiple fronts. Mubadala had recently acquired Viceroy Hotel Group, a hotel-management company, and Low had offered to buy the L’Ermitage and then rebrand it as a Viceroy Hotel. Ambassador Otaiba had made money from his dealings with Low on the Iskandar land project in Malaysia, and he hoped to get in on more deals.

From the IOLTA accounts at Shearman & Sterling, he sent $3 million to Rose Trading, a Hong Kong–based jewelry trading firm that supplied Rosmah. It was only the start of tens of millions of dollars of jewelry that Low would procure for Rosmah, and soon Najib also would begin receiving spoils in the form of political funding. Beginning in 2010, Low also acquired multi-million-dollar luxury homes in London, Los Angeles, and New York, making them available to Najib and his family. A Low-controlled shell firm acquired a condominium in New York’s Park Laurel building, just off Central Park West, for $36 million. But it was Riza Aziz, Rosmah’s son, who made the 7,700-square-foot duplex, with floor-to-ceiling windows, his home in New York.

By 2010, faceless shell companies, many of them based offshore, accounted for more than half of the hundreds of billions of dollars in high-end U.S. property sales each year — an arrangement that was wholly legal under U.S. law — and Low was becoming adept at hiding his involvement.

The Malaysian was well on his way to repaying his debt to Najib for allowing him to run the fund. The prime minister did not pry about the origins of the money for these luxurious homes. The involvement of Low, who on paper was behind the purchases, allowed Najib to deny any knowledge of the funds’ provenance. He was a figure who permitted the prime minister to keep his hands clean.

Chapter 13 - Where’s Our Money?

The prime minister knew 1MDB was secretly fueling his political machinations and was not as legitimate as it appeared.

Amid the wasted spending and the lack of focus, many of the Ivy League recruits quit after less than a year. More worryingly to many, it became clear the fund’s main reason to exist was as a pot of political money to boost Najib’s popularity. Even without steady cash flow from operations, 1MDB was starting to channel money as “corporate social responsibility” to help encourage voters to support UMNO, the ruling party.

Chapter 16 - Shitty, Junk Products

A year after Vella joined Goldman’s London office in 2007, he began overseeing the bank’s relationship with the Libyan Investment Authority, a new sovereign wealth fund set up by Muammar Qaddafi’s government.

The bank effectively cut a check to Sarawak, allowing the state government to get its hands on the cash immediately and without having to go through a road show to attract investors. In return, Goldman got the bonds for cheap and was later able to sell them to investors. By the time Goldman had offloaded the entire issue to institutional investors — mutual and pension funds — it made a profit of $50 million on the deal. That was significantly higher than the normal $1 million fee that Asian, U.S., and European banks charged for selling bonds for governments in the region — work that was considered easy and risk free, in part because governments are less likely to default than companies.

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.

Chapter 17 - My Good Friend, Leo

In DiCaprio’s case, the Malaysian dangled the possibility of independence from the marquee Hollywood studios. Although he was Hollywood royalty and owned a production company, Appian Way, DiCaprio still had to bow to the will of powerful studio executives, and this power dynamic had been laid bare in his faltering plans to make The Wolf of Wall Street. In 2007, DiCaprio won a bidding war with Brad Pitt for the rights to the memoir of Jordan Belfort

In September 2010, Riza Aziz and Joey McFarland set up Red Granite Productions (it would later change its name to Red Granite Pictures), operating at first out of a suite of rooms in the L’Ermitage hotel in Beverly Hills.

Chapter 18 - Two-Million-Euro Bottle Parade

He’d sailed into town a few days earlier, with Paris Hilton still in tow, on the Tatoosh, a 303-foot, ten-cabin superyacht, complete with swimming pool and helicopter pad, owned by Microsoft cofounder Paul Allen. These were the days of bottle parades, an invention by clubs to get “whales” to spend even more money by ordering multiple magnums — or even jeroboams — of champagne. If the order was big enough, bottle girls — usually models earning extra cash — would bring out the champagne with sparklers attached, as the DJ cut the music and lauded the buyer. Back in New York, Low’s spending had helped popularize these parades.

Chapter 19 - “Keep Your Nonsense to Yourself”

Evidently pleased with the benefits his family derived from 1MDB, the prime minister gave the green light to send even more government cash to the PetroSaudi joint venture. In 1MDB documents pertaining to the new lending, Najib argued it was valid “in consideration of the government relationship between the Kingdom of Saudi Arabia and Malaysia.” On July 24, 2010, in a meeting of 1MDB’s board, one member questioned whether the prime minister was backing this further investment. Chief Executive Shahrol Halmi replied that Najib was fully on board. In the end, 1MDB sent over a further $800 million, almost doubling the amount the fund had pumped into the joint venture.

Chapter 20 - Belfort Smells a Scam

It had then embarked on its first modest production, the $10 million comedy Friends with Kids starring an ensemble cast including Kristen Wiig and Jon Hamm, the rights to which Red Granite had acquired from another studio.

“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.”

A few months earlier, Low had arranged for legendary music producer Jimmy Iovine, cofounder of Interscope, to throw a Grammys after-party on the roof of L’Ermitage. Interscope wasn’t hosting its own party, and so Low approached Iovine with an offer to organize one for him. The cream of the music world came out for it. Lady Gaga, Snoop Dogg, and Dr. Dre performed to a crowd that included Beyoncé and Jay-Z, as well as Busta Rhymes, Nicole Scherzinger, Eminem, and others. Low’s usual group was there, too: Jamie Foxx and Paris Hilton among them. Under Arabian-style tents, DiCaprio, wearing an Irish cap and smoking a cigar, chatted with Bar Refaeli, his model girlfriend.

Swizz Beatz and Alicia Keys entered Low’s trusted circle, attending his end-of-year ski holidays with Joey McFarland and Riza Aziz, Jasmine Loo of 1MDB, and other close associates.

The involvement of Aabar was also an attraction. The fund was controlled by the International Petroleum Investment Company, or IPIC, a $70 billion sovereign wealth fund owned by the government of Abu Dhabi.

In June 2011, Low brokered a deal for Aabar to acquire a stake in a Malaysian bank, RHB, for which it paid $2.7 billion. Soon after, the bank’s stock price fell sharply, and Aabar was stuck with paper losses of hundreds of millions of dollars.

Chapter 22 - Penthouse with a View

The 4,825-square-foot unit, with three bedrooms, a library, and a fish tank hanging from the ceiling in the “Great Room,” had once been the home of Jay-Z and Beyoncé, who rented it for $40,000 per month.

The acquisition of penthouse 76B was secured in June for $30.5 million in cash, one of the highest prices for the building and a price tag that made it among the most expensive apartments in the United States.

Low’s ability to get this far was in part a result of the failings of compliance efforts at major financial institutions.

The primary U.S. law against money laundering is the Bank Secrecy Act of 1970, which requires institutions to keep records of financial transactions and report suspicious activity. A 1986 law made it illegal for banks to take part in, or cover up, money laundering. The PATRIOT Act of 2001, aimed at snuffing out terrorism financing after the September 11 attacks, forced banks to set up compliance programs and enhance due diligence on customers.

What Low needed was a smaller bank, one that would be dependent on his business and took compliance even less seriously than Wall Street behemoths. He found it in a struggling Swiss bank called BSI, which was owned by Italian insurance group Assicurazioni Generali.

This was layering, the process of hiding money’s origins through a complex maze of transactions — a crucial instrument in the money launderer’s tool kit.

Chapter 23 - Switzerland of the East

Singapore. The Southeast Asian city-state of five million people, located on a tropical island near the equator, was positioning itself as the “Switzerland of the East,” complete with banking secrecy laws modeled on Switzerland’s.

By the mid-2000s, however, European nations and the United States had lost patience with Switzerland and began to pressure the country to hand over information on tax cheats. The European Union and Switzerland signed a treaty that forced Swiss banks to divulge information on accounts held by citizens of other European nations or withhold a tax on customers who wished to remain anonymous. Surrounded by EU nations on all sides, and dependent on open-border trade with its neighbors, Swiss politicians had no choice but to agree to this compromise. European clients began to look for other places to stash their money.

His connection to Low made him exceedingly rich; Yak began to take home around $5 million a year in salary and bonuses, more than five times his previous earnings, binding him to Low, the money and adulation too alluring to turn down.

Chapter 24 - Brazen Sky

Curaçao, which in the 1970s and 1980s emerged as a major offshore center. It also got a name as a transshipment point for drugs from South America to enter the United States and a haven to stash dirty cash, regularly landing Curaçao on the U.S. State Department’s list of “Major Money Laundering Countries.”

Sure, this entity, Enterprise Emerging Market Fund, took cash from multiple investors. But the structure masked one major difference from a plain-vanilla mutual fund: It also comprised segregated portfolios that took cash from only one client, before “investing” in another asset. It was simply a way to wash a client’s money through what looked like a mutual fund. In other words, cash coming out the other side appeared to be a transfer from a mutual fund.

Singapore’s private banking industry was booming, managing $1 trillion in assets, a third of Switzerland’s total, but still making it one of the largest offshore centers on the planet.

The Financial Action Task Force, the Paris-based group which sets anti-money-laundering standards, recently had singled Singapore out for failing to prosecute more dirty-money cases.

Chapter 25 - Goldman and the Sheikh (The Second Heist)

Obtaining a sit-down meeting with Sheikh Mansour was almost unheard of, even for the most heavyweight investors. The sheikh’s power derived not only from his personal fortune, but also his role as chairman of the International Petroleum Investment Company, a $70 billion sovereign wealth fund. IPIC, financed by huge amounts of debt, recently had become a global investment force — it had even taken a stake in Barclays Bank of the UK during the financial crisis.

The proposal for IPIC to guarantee the Malaysian fund’s bonds may have looked strange, but it was an artificial construct, purely aimed at creating an excuse to divert more than a billion dollars from 1MDB.

After working for the Abu Dhabi Investment Authority, the emirate’s most well-known and largest sovereign wealth fund, he had become managing director of IPIC in 2007, but his real power lay as Sheikh Mansour’s trusted dealmaker. There was another attraction to Al Qubaisi: He had a reputation for taking kickbacks on deals, making him incredibly rich.

Behind his brash demeanor, Al Qubaisi had a problem. Unlike ADIA, which could rely on payments from the state’s oil profits, 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. After the crisis, when Al Qubaisi saw an opportunity to buy stakes in big Western companies and banks, he turned to Wall Street for financing.

Chapter 26 - Bilking the State

Cohn had set up a special cross-divisional unit to make money from sovereign wealth funds — co-investing with them in private-equity deals, devising hedging strategies, or simply raising capital. This business line was colloquially termed “monetizing the state” inside Goldman and was a major focus inside the bank.

There was another reason Goldman didn’t need to worry. Tanjong, the seller of the power plants, had itself agreed to subscribe to a “significant” portion of the offering, according to the prospectus, a document Goldman bankers had drawn up to detail the bond for investors. The 1MDB fund had paid Tanjong a favorable price for its assets, and now the company itself was getting bonds with an attractive yield. In return, companies linked to Ananda Krishnan secretly made donations of $170 million to 1MDB’s charity arm. Soon after, in its financial accounts, the fund was forced to “impair” — or write off — $400 million of the value of the plants on its books, an admission it had overpaid. Lazard had been right to mistrust the high valuation of Tanjong’s assets, but Goldman missed what was going on. Goldman’s internal committees, set up to catch fraud, had failed in their job.

Compliance had good reason to be wary. 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. But this was an imitation firm, set up two months earlier, and the directors of the look-alike Aabar were Al Qubaisi and Al Husseiny, the chairman and chief executive of the real fund. It was as if the chief executive of General Electric, or another blue-chip American firm, had set up a fake company to look like General Electric to engage in off-the-books fraudulent behavior, while still enjoying the cover of a well-known name.

As a further level of security, the pair had arranged for the money to flow via Switzerland-based Falcon Private Bank, which Aabar had bought from American insurance conglomerate AIG. Al Qubaisi had snapped it up when AIG was in trouble during the financial crisis and renamed it Falcon Bank, after the Gulf’s famous hunting bird. Switzerland was under pressure from the United States to clamp down on money laundering, but Al Qubaisi had control of his own Swiss bank. Consequently, Falcon’s bankers raised no red alerts, despite huge flows of money that would normally have tripped compliance alarms.

Five months later, Goldman launched Project Maximus, buying another $1.75 billion in bonds to finance 1MDB’s acquisition of power plants from the Malaysian casino-and-plantations conglomerate Genting Group. Again, the fund paid a high price, and, like Tanjong, Genting made payments to a Najib-linked charity. This time, $790.3 million disappeared into the look-alike Aabar.

For bringing in the business, Leissner was paid a salary and bonuses in 2012 of more than $10 million, making him one of the bank’s top-remunerated employees.

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. Here was the capital needed to make The Wolf of Wall Street, to pay off Malaysian voters, and to finance ever-more-exuberant parties and gambling.

Soon after 1MDB raised its second bond and funds flowed to the look-alike Aabar, a stream of money — eventually totaling more than $400 million — moved to an account controlled by Al Qubaisi’s company, Vasco Investment Services, at Edmond de Rothschild bank in Luxembourg.

In late April, as Goldman prepared 1MDB’s first bond issue, some one hundred thousand anticorruption protesters poured out into the streets of Kuala Lumpur.

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. Most of the money had been diverted, and the fund had crashed to a $30 million net loss in its latest financial year.

PART III - EMPIRE

Chapter 27 - Making Busta His Bitch

The thirty-year-old’s new company, a Hong Kong outfit called Jynwel Capital, had just acquired a stake in EMI Music Publishing, whose hit-making writers included Kanye West, Beyoncé, Usher, Alicia Keys, and Pharrell Williams.

The $2.2 billion acquisition of EMI, finalized a month earlier, was led by Sony Music Holdings, the Estate of Michael Jackson, and U.S. private equity giant Blackstone Group. Low’s Jynwel Capital had invested alongside Mubadala, the Abu Dhabi fund run by Khaldoon Al Mubarak. His share, just over $100 million, was by far his most legitimate-looking deal to date.

To hide the origin of the money, Low used an old trick, getting his associate Fat Eric to set up an offshore shell company called Blackstone Asia Real Estate Partners. This firm was designed to look like a bonafide subsidiary of the Blackstone Group but was controlled by Fat Eric, who worked for Low.

The song had been written by Antoniette Costa, a singer who recently had begun to date Joey McFarland.

Chapter 30 - “681 American Pies” (The Third Heist)

By now, Goldman had established a track record for this kind of transaction, and on March 19, the Hong Kong PFI desk, as with the earlier two issuances, bought the $3 billion bond in its entirety. This time, Prime Minister Najib, who also headed the Finance Ministry, signed a letter of support for the bond, meaning Malaysia’s government promised to repay the debt in the event of a default. For the firm’s work, Goldman made just short of $300 million in profits. 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.

Only days later, Goldman deposited the proceeds from the $3 billion bond with BSI, and $1.2 billion immediately was purloined, moving through the Curaçao funds into a British Virgin Islands company. The shell firm, Tanore Finance Corporation, was controlled by Fat Eric. Then, in two separate transfers, $681 million moved from Tanore to the prime minister’s secret account. The correspondent bank for both wires was Wells Fargo, which Low used, along with J.P. Morgan, for most of his large transactions involving U.S. dollars. Seemingly unperturbed by the lack of a beneficial owner’s name on such a large transfer — a glaring red flag — Wells Fargo let it through, just a tiny drop in the pool of trillions of dollars that U.S. correspondent banks process every day.

Chapter 31 - Art No One Can See

No one except Low knew how much he had taken over the past four years, and even he was stretched to stay on top of it: more than $1.5 billion from the PetroSaudi phase from 2009; $1.4 billion from the first two Goldman bonds in 2012; and now over $1.2 billion more. On top of this, over $1 billion in loans from the pension fund for Malaysia’s civil servants to a 1MDB unit called SRC International had gone missing. More than $5 billion in funds, one of the largest-ever financial frauds, and it wasn’t over yet. More than a billion had been frittered away, more than a billion went into property and businesses, and more than a billion was used to pay off the prime minister and other conspirators.

The growing cost of fine art, like that of real estate on the Upper East Side of Manhattan or in London’s Knightsbridge, was partly due to the innate worth of the painting or the residence, coupled with limited supply. But it was also a reflection of the amount of dirty money in the market, and that night at Christie’s was a glaring example of the problem, even if the auction house was not aware of it.

This is the Geneva Freeport, a warehouse for the überelite to stash their possessions — gold bars, bottles of rare wine, and, most recently, art.

Freeports have a long history in global commerce as a place for traders to temporarily deposit commodities or other goods without incurring local taxes. Authorities were willing to forgo the revenues if it led to more economic activity and investment.

Without legal limits on storage periods, the rich could use the Freeport to keep their possessions indefinitely out of the hands of tax authorities back home. By 2013, Switzerland’s Finance Ministry estimated the value of goods inside came to more than 100 billion Swiss francs, including 1.2 million pieces of art and 3 million bottles of fine wine. If opened to the public, the warehouses would have been the finest museum anywhere, with more works than the Louvre or the Prado.

In 2013, the U.S. Justice Department launched a program that permitted Swiss banks to avoid criminal prosecution if they agreed to come clean about abetting U.S. citizens to evade tax.

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. But Low had picked up more via other channels, such as the van Gogh, as well as works by Lichtenstein, Picasso, and Warhol, and by the end of the year he possessed art worth an estimated $330 million.

Chapter 32 - Jewelers and Bankers

As always, Jamie Foxx, by now a good friend of Low’s, was on hand to play the piano and sing.

Chapter 36 - The Oval Office

The film would be extremely lucrative at the box office, earning more than $400 million globally, almost four times the cost of production. Despite his constant scheming, Low was exhibiting skill as an investor.

Chapter 37 - Size Matters

Between April 2013 and September 2014, Low used the Blackrock account to purchase $200 million in jewelry from across the globe: Las Vegas, New York, Hong Kong, Dubai. Even more portable than art, diamonds are extremely hard to track. The Financial Action Task Force, in a 2013 report, warned that money launderers and terrorists used the diamond industry as a conduit for illicit cash.

Chapter 38 - Losing Control

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.

PART IV - BONFIRE OF SECRETS

Chapter 39 - “No Cash. No Deal.”

Then, 1MDB requested Deutsche Bank send the first tranche of the $725 million loan directly to Aabar. It was an odd arrangement. Normally a bank, for compliance reasons, would send such large amounts of cash directly to the borrower. But Deutsche was satisfied by the apparent involvement of the Abu Dhabi fund. The perpetrators had tricked the bank: The recipient was another look-alike Aabar, set up by Al Husseiny with an account at UBS Bank in Singapore. Two days later, more than $100 million was diverted to a shell company controlled by Fat Eric.

It was the craziest plan to date, so outlandish it appeared to have no chance of success. 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.

Chapter 42 - The Exposé

In the ensuing weeks, officials at Bank Negara Malaysia, under Governor Zeti Akhtar Aziz, combed through the documents from the raid, revealing a stunning fact: The prime minister had received more than $1 billion into his personal accounts between 2011 and 2014.

Chapter 43 - Buttocks in a G-String

Within the past year, Al Qubaisi had put his half a billion in 1MDB money to work, purchasing a penthouse in New York’s Walker Tower for $51 million, and two mansions in Los Angeles for a combined $46 million. As chairman of Hakkasan Group, a nightclub empire owned by Sheikh Mansour, he had become one of Las Vegas’s most powerful businessmen. Around the time of Haoues’s blackmail threat, Al Qubaisi launched the Omnia nightclub in Caesars Palace. Its name meaning “the sum of all things” in Latin, Omnia was the most expensive nightclub ever built, at over $100 million, and could host more than 3,500 revelers.

Chapter 44 - Strongman Najib

In one brutal house clearing, Najib had solidified his control on power. Days later, British Prime Minister David Cameron flew into Malaysia for an official visit. He’d just given a speech in Singapore about how Britain needed to stop corrupt cash from flowing into London’s property market, where Malaysians were among the biggest buyers. In private, he pressed Najib on the corruption claims, and Malaysia’s human rights record. Najib was furious at the lecture by Cameron. His love affair with Western democracies was over.

Over the coming months, the red shirts — many of them aggressive-looking ethnic Malays wearing bandanas — disrupted antigovernment protests and assaulted activists.

PART V - THE CAPTAIN’S RESOLVE

Chapter 46 - Special Agent Bill McMurry

His biggest triumph to date was unraveling the case of Sister Ping, a Chinatown underworld figure who in 2006 was sent to jail for thirty-five years for her role in a human-trafficking enterprise.

“Corruption leads to lack of confidence in government. Lack of confidence in government leads to failed states. And failed states lead to terror and national security issues,” was how Special Agent Jeffrey Sallet, chief of the FBI’s Public Corruption Section, put it when announcing the international corruption squads.

This was easier to deal with than Pakistani money launderers, who often would go into hiding for years and make their funds disappear through the informal hawala money-transfer network.

Fearing the worst, Prime Minister Najib and Riza Aziz hired Boies, Schiller & Flexner, cofounded by the well-known U.S. lawyer David Boies, to represent them. The firm assigned a tough young lawyer called Matthew Schwartz to the new clients. Schwartz knew something about financial crime. In a former life, he’d been a key member of the crack team that successfully prosecuted Bernie Madoff.

Chapter 47 - Partying on the Run

But the decision of celebrities like Swizz Beatz and Alicia Keys to continue to fraternize with Low, despite stories in the Journal and Singapore’s probe into the Malaysian, was more surprising.

Red Granite’s latest movie, Daddy’s Home, starring Mark Wahlberg and Will Ferrell, had just premiered and McFarland wasn’t yet ready to let go of the Hollywood dream.

Chapter 48 - China Connection

a series of deals, Chinese state-owned companies agreed to acquire the bulk of 1MDB’s assets: land in Kuala Lumpur and power plants.

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. It was no surprise then that Najib turned away from President Obama, who had lost faith in Malaysia as a model Islamic democracy, and looked instead to China’s authoritarian rulers.

Chapter 49 - Glass Half Full

Moments later, she announced the largest-ever asset seizure under the Kleptocracy Initiative. With the help of the Malaysian Anti-Corruption Commission, and other Malaysian officials who met FBI investigators in secret, the Bureau had pieced together the details of one of the biggests frauds in history. Flanked by senior Justice Department and FBI officials, 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.

In a later news release, the FBI even praised the “tremendous courage” of the Malaysian Anti-Corruption Commission in pursuing its own investigation. It was as close as the FBI could get to thanking the commission’s staff for secretly helping the Bureau with its own probe.

Chapter 50 - White-Collar Crime

Kerr had split with Low after the first stories about him began to emerge in early 2015. In May 2017 she married Evan Spiegel, the billionaire founder of Snapchat, cutting all ties with Low.

Chapter 51 - King Khadem Falls

Moody’s estimated the government would be on the hook to repay about $7.5 billion of the fund’s debt, a sum equivalent to 2.5 percent of Malaysia’s economy. Foreign investors, worried over the 1MDB scandal, sold Malaysian assets, pushing the local ringgit currency down 30 percent against the U.S. dollar in just a few months.

Epilogue

Nicole Scherzinger, the former lead singer of the Pussycat Dolls, who was due to perform after a dinner for more than fifty guests, had been picked up by a chauffeured car at the airport. On the drive into Bangkok, where Low still had some clout, he had organized for police to escort Scherzinger’s vehicle through the city’s infamously snarled traffic.

But Jho Low’s crime is a modern take on that old story. 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.

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. At 2:30 p.m. on July 3, 2018, exactly three years after the Wall Street Journal reported on the $681 million that Najib had received, anticorruption officials arrested the former prime minister from his Kuala Lumpur mansion.