MALAYSIA said it’s entered mediation talks with Julius Baer Group in a bid to settle a US$112 million lawsuit filed against the Swiss bank by a unit of the failed 1MDB development fund.
SRC International (Malaysia) sued the Zurich-based firm in 2021, claiming a breach of fiduciary duty for its role in the scandal, according to a filing with a Hong Kong court.
“Mediation is ongoing,”’ Johari Abdul Ghani, chairman of the 1MDB asset recovery task force, told Bloomberg News on Thursday in response to questions.
Baer declined to comment when asked whether it’s participating in mediation talks. The firm stands by a statement in its first-half earnings report that it’s contesting the claim, “while taking appropriate measures to defend its interests,” a spokesperson said.
The Malaysian fund collapsed in 2016, spawning multiple lawsuits against banks across Asia, Europe and the US.
1MDB was originally intended as a development fund to finance big infrastructure projects and spur economic growth in the South-east Asian country. Instead, alleged mastermind Jho Low and his co-conspirators were suspected of using 1MDB as a scheme to pay bribes and enrich themselves.
In August, JPMorgan settled a case filed in Malaysia, agreeing to pay RM1.4 billion (S$440.6 million) “without admission of liability.”
The Singapore High Court two months later blocked attempts by 1MDB liquidators to sue Standard Chartered Bank and BSI Bank over transactions allegedly linked to the collapsed fund, citing technical grounds.
SRC obtained two loans from Malaysia’s state-controlled pension funds for investing in energy resources for the benefit of Malaysians, according to the suit.
The firm, under its management, instructed Baer to make “fraudulent payments” totaling about US$112.5 million to third parties.
Julius Baer carried out the payments from 2013 to 2016, even though the 1MDB scandal had been publicised internationally by then, and there were “‘red flag’ grounds for suspicion” about SRC’s management, the suit alleged.
Separately in Malaysia, a suit against Deutsche Bank AG for US$1.1 billion in damages is currently set for trial in January. The German bank is going to fight the case, said people with knowledge of the matter who asked not to be named because the case is still before the court. A Deutsche Bank spokesperson declined to comment.
As of the end of July, about RM42.2 billion has been channeled to finance debt repayments and other commitments of 1MDB, according to the finance ministry.
The Malaysian government has recovered RM29.7 billion of funds relating to 1MDB and its former unit SRC International Sdn. since the establishment of the assets recovery account, the ministry said. BLOOMBERG
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