1Malaysia Development Berhad

1Malaysia Development Berhad (1MDB) started off as Terengganu Investment Authority (TIA) which was initiated by the Menteri Besar of Terengganu at the time, Ahmad Said in 2008. TIA was a sovereign wealth fund with an initial fund of RM11 billion (US$3.25 billion in 2008) aimed at ensuring the economic development of Terengganu state. The fund's purpose was to ensure a long-term sustainable development while safeguarding the economic well-being of Terengganu residents. The TIA fund was derived from outstanding royalty income of RM6 billion and funds from bond issued by local and overseas financial markets. In addition, the Federal Government had proposed to provide a guarantee of RM5 billion based on Terengganu's future oil revenues.

On 27 May 2009, Ismee Ismail and Shahrol Azral Ibrahim Halmi signed a deal arranged by AmInvestment Bank Bhd to raise RM5 billion via the issuance of Islamic medium term notes (IMTNs), despite being told not to do so by the Terengganu state government. This exercise was advised by TIA's special advisor, Jho Low. On 29 May 2009, TIA received RM4.385 billion in net proceeds from IMTN from the full value of RM5 billion.

On 31 July 2009, Minister of Finance (Incorporated) (MOFI) took over TIA and amended its name to 1Malaysia Development Bhd (1MDB). This acquisition by MOFI took place four months after Najib Razak became the Prime Minister of Malaysia. In his announcement on 22 July 2009, Najib said the decision to expand TIA into a federal entity was made to enable its benefits to reach a broader spectrum of Malaysians rather than the residents of only one state.

In general, 1MDB investments can be summarized as:

Investment in PetroSaudi Holdings (Cayman) Ltd

Investment in Segregated Portfolio Company (SPC)

Investment in SRC Group

Investment in real estate sector

On 12 September 2012, Brazen Sky Ltd (a subsidiary of 1MDB), entered into an investment management agreement with Bridge Global Absolute Return Fund SPC (Bridge Global SPC) and Bridge Partners Investment Management (Cayman) Ltd. to invest US$2.318 billion funded by the promissory notes from PSOSL sales. The investment involved various portfolio investments in the segregated portfolio company of the Cayman Islands. However, the company in charge of this investment, Bridge Global Absolute Return Fund SPC (Bridge Global SPC), was a new month-old company with no fund management licence nor experience in managing large funds.

On 20 May 2013, 1MDB's board of directors redeemed the investment gradually which would improve perceptions of the funds's credibility. As of 20 December 2014, the total redeemed from the SPC fund was US$1.39 billion out of US2.318 billion and the balance of US$939.87 was to be fully redeemed by the end of December. The US$1.39 billion was transferred into Brazen Sky's bank account and then transferred into 1MDB Global Investment Ltd (1MDB-GIL) account. The SPC funds with a booked value of US$2.318 was pledged to Deutsche Bank for a loan amount of US$975 million without the approval of 1MDB's board. From the proceeds of initial redemption and with Deutsche Bank loan, some US$993 million was used for the payment of the Aabar option termination (though originally the settlement agreement was only US$300 million instead of US$993 million). The Aabar option was an option given to Aabar Ltd in exchange of a guarantee of Abu Dhabi's International Petroleum Investment Co (IPIC) to give 1MDB a total of US$3.5 billion in bond issuances via Goldman Sachs. All of these actions raised questions as they were not consistent with the initial objective of bringing the SPC portfolio back to Malaysia.

Scandal

The involvement of 1MDB in the multi-billion-ringgit Tun Razak Exchange development project drew criticism from the opposition within a year of commencement. Opposition leader and Member of Parliament of Permatang Pauh, Anwar Ibrahim, questioned the credentials of the company. He informed Parliament that according to the records held by the companies commission, 1MDB "had no business address and no appointed auditor." Anwar further questioned the then-current Prime Minister, Najib Razak, regarding his role in getting 1MDB involved in the Tun Razak Exchange project.

1MDB's RM425 million (US$140 million) profit between 25 September 2009 and 31 March 2010 raised questions about the lack of transparency of 1MDB's accounting. Tony Pua, DAP Member of Parliament for Petaling Jaya Utara questioned former Prime Minister Najib Razak, who was also 1MDB's advisory board chairman, as to whether the figures were the result of asset injections into 1MDB by the government, such as the transfer of land rights to the company.

During the October 2010 parliamentary session, 1MDB explained that its accounts had been fully audited and signed by KPMG, and closed as of 31 March 2010. Deloitte was involved in the valuation and analysis of the portfolio, while Ernst & Young provided tax advice for 1MDB. The company also informed that it had lodged the necessary information, including providing a registered address, with the Companies Commission of Malaysia (CCM) as required by the law. The registration information was made available on the company's website.

During 2013, 1MDB was in the spotlight again when it applied for a six-month extension for the publication of its annual report that was supposed to be filed with the CCM by 30 September 2013. In the meantime, the change of auditors three times in the four years since its inception in 2009 was widely considered suspicious.

By mid-2015, with 1MDB's accumulated debts totalling RM42 billion (US$12 billion), bonds issued by the fund were downgraded to junk status by the major rating agencies such as Standard & Poor's and Fitch Ratings. The Malaysian cabinet rejected a RM3 billion ($US1 billion) cash injection, narrowing 1MDB's options to repay its debts on time.

In 2015, allegations were made in several newspapers, including The Wall Street Journal, mentioned that the 1MDB organisation had been used to steal state funds for transfer into the accounts of former Prime Minister Najib Razak, and people associated with him such as Jho Low.