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The U.S. Is Preparing to Charge a Leading Figure in Malaysian Scandal

The Wall Street Journal. logo The Wall Street Journal. 21/3/2017 Bradley Hope, Tom Wright

U.S. authorities intend to file criminal charges against a financier in connection with an international scandal rooted in Malaysia that they believe could be one of the largest financial frauds ever, according to people familiar with the matter.

The scandal involves a state fund called 1Malaysia Development Bhd., or 1MDB, and the focus of the criminal investigation is Jho Low, a flamboyant financier the U.S. Justice Department portrayed in civil asset-seizure lawsuits last July as central to an alleged plot to siphon billions of dollars from the fund.

The civil suits, which are proceeding separately from the criminal probe, seek more than $1 billion of assets, including van Gogh and Monet paintings and luxury real estate in New York and Los Angeles, allegedly bought with stolen money. The Justice Department is currently seeking to add recently discovered Low family property to the list of assets it is trying to seize, including a yacht Mr. Low controls, the $165 million, 300-foot, helipad-equipped Equanimity, people familiar with the U.S. investigation said.

In addition, Singapore has been building a potential criminal case against Mr. Low, said a person involved in the city-state’s investigation. A Justice Department team has just finished a visit to Singapore to conduct interviews related to Mr. Low and other aspects of the 1MDB matter, said two people familiar with the trip.

Mr. Low, a Malaysian whose full name is Low Taek Jho, and his lawyers didn’t respond to requests for comment. In the past, Mr. Low has told news organizations he was the victim of political infighting in Malaysia and was only an informal adviser to 1MDB. His family is taking legal action to fight the U.S. asset-seizure lawsuits.

Mr. Low, a 35-year-old known for hanging out with Hollywood celebrities and hosting lavish parties in Las Vegas and elsewhere, struck a confident tone in a New Year’s message to friends this January. “2016 was the Perfect Storm; but the calmness and resolve of our Captain, led his loyal Sailors whom placed their lives with utmost trust in his leadership weathered the storm,” Mr. Low wrote in a WeChat message viewed by The Wall Street Journal. “The men and women that came out of the storm were not the same men that walk in. Through struggle, they established new strengths they never knew they collectively had,” he wrote.

“The very moment they were brought to their knees, and their world was about to fall apart,” Mr. Low added, “their Captain’s exemplary leadership guided them to safety; and through this experience, they achieve a new level of humility, nobility and higher intelligence ready to set sail for greater achievements in 2017 for their people!”

Since the U.S. filed its asset-seizure suits, which are against the assets themselves and don’t name people as defendants, Mr. Low has largely disappeared from public view. He has deleted some email accounts, changed phones regularly and avoided the U.S., said people familiar with his movements.

With his bank accounts frozen by several countries—and Mr. Low warned by officials in Malaysia to stay away, according to people familiar with the matter—the financier has mainly been living in China and Thailand, said those familiar with his comings and goings. At the Peninsula Hotel in Shanghai, a staff member last year described Mr. Low as a long-term resident. Mr. Low’s yacht has been moored in Thai waters since October.

The Equanimity recently was berthed for around 40 nights at the Ao Po Grand Marina on the Thai resort island of Phuket, records show, at a cost of about $20,000, part of it settled from a baht account at Bangkok Bank. The bank and the marina manager declined to comment.

The 1MDB scandal unfolded when the Malaysian fund, which had run up a multibillion-dollar debt to finance development but had little to show for it, began struggling to repay. Later, billions of dollars were found to be missing. Investigations in search of the money sprang up in six countries.

The U.S.’s prosecution plans, which could change or be dropped as its investigation continues, involve filing criminal charges of wire fraud and money laundering against Mr. Low and potentially some of his associates, said people familiar with the probe. They didn’t describe the potential timing. To obtain an indictment, prosecutors would present evidence to a grand jury, which would need to agree the government had probable cause to believe a law had been broken.

Any charges could increase pressure on Malaysian Prime Minister Najib Razak, who set up 1MDB and was close to Mr. Low. Mr. Najib received more than $1 billion in his personal bank accounts—including more than $800 million originating with the state fund—via a network of offshore funds and accounts controlled by Mr. Low and his associates, according to Malaysian investigation documents viewed by the Journal and to people familiar with the U.S. investigation.

© Dimitrios Kambouris/Getty Images

The U.S. asset-seizure suits refer to a “Malaysian Official 1” that the suits allege received hundreds of millions of dollars siphoned from 1MDB. “Malaysian Official 1” refers to Mr. Najib, according to a person with knowledge of the investigation.

Mr. Najib has denied any wrongdoing. Early last year, Malaysia’s attorney general said large deposits in his accounts were a donation from a member of Saudi Arabia’s royal family and most was returned. Attempts to contact Mr. Najib for this article were unsuccessful. The 1MDB fund itself has also denied wrongdoing and pledged cooperation with investigators.

Days before the U.S. filed its asset-seizure suits, Mr. Low tried to sell a Monet painting for €26.9 million, using an account at a bank on the island of Comoros off Africa’s east coast, according to the court filings. They show that compliance staff at another bank involved in the planned transaction, Moroccan Foreign Trade Bank International, rejected it following the U.S. suits. Both banks declined to comment.

Many of the assets sought are owned through trusts, court filings show. After trustees in New Zealand declined to resist the U.S. seizure suits, lawyers for the Low family persuaded courts in New Zealand and the Cayman Islands to transfer some assets to a new trustee, according to the filings. The lawyers have asked another court, in California, to let this new trustee challenge the U.S. civil suits.

Court proceedings in New Zealand revealed additional Low family assets that the Justice Department now is seeking to add to its seizure list. Besides the yacht, they include a luxury apartment in Paris and a London penthouse with views of Buckingham Palace.

Amid the growing pressure, Mr. Low has taken inspiration from “The King of Oil: The Secret Lives of Marc Rich,” according to people who have discussed the book with him. The late Mr. Rich was a commodities trader indicted in the U.S. on tax evasion and other charges who lived without arrest for decades in Switzerland, then was pardoned by President Bill Clinton in 2001. In Mr. Low’s case, Switzerland is among countries pursuing investigations of 1MDB, and it has frozen Mr. Low’s bank accounts.

Write to Bradley Hope at bradley.hope@wsj.com and Tom Wright at tom.wright@wsj.com

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