Billion Dollar Whale

Low Taek Jho, who westernised his name to “Jho Low”, which I will use henceforth, was the son of a wealthy family in Penang, Malaysia. The family's fortune had been founded by Low's grandfather who had immigrated to the then British colony of Malaya from China and founded a garment manufacturing company which Low's father had continued to build and recently sold for a sum of around US$ 15 million. The Low family were among the wealthiest in Malaysia and wanted the best for their son. For the last two years of his high school education, Jho was sent to the Harrow School, a prestigious private British boarding school whose alumni include seven British Prime Ministers including Winston Churchill and Robert Peel, and “foreign students” including Jawaharlal Nehru and King Hussein of Jordan. At Harrow, he would meet classmates whose families' wealth was in the billions, and his ambition to join their ranks was fired.After graduating from Harrow, Low decided the career he wished to pursue would be better served by a U.S. business education than the traditional Cambridge or Oxford path chosen by many Harrovians and enrolled in the University of Pennsylvania's Wharton School undergraduate program. Previous Wharton graduates include Warren Buffett, Walter Annenberg, Elon Musk, and Donald Trump. Low majored in finance, but mostly saw Wharton as a way to make connections. Wharton was a school of choice for the sons of Gulf princes and billionaires, and Low leveraged his connections, while still an undergraduate, into meetings in the Gulf with figures such as Yousef Al Otaiba, foreign policy adviser to the sheikhs running the United Arab Emirates. Otaiba, in turn, introduced him to Khaldoon Khalifa Al Mubarak, who ran a fund called Mubadala Development, which was on the cutting edge of the sovereign wealth fund business.Since the 1950s resource-rich countries, in particular the petro-states of the Gulf, had set up sovereign wealth funds to invest the surplus earnings from sales of their oil. The idea was to replace the natural wealth which was being extracted and sold with financial assets that would generate income, appreciate over time, and serve as the basis of their economies when the oil finally ran out. By the early 2000s, the total funds under management by sovereign wealth funds were US$3.5 trillion, comparable to the annual gross domestic product of Germany. Sovereign wealth funds were originally run in a very conservative manner, taking few risks—“gentlemen prefer bonds”—but since the inflation and currency crises of the 1970s had turned to more aggressive strategies to protect their assets from the ravages of Western money printing and financial shenanigans.While some sovereign wealth funds, for example Norway's (with around US$1 trillion in assets the largest in the world) are models of transparency and prudent (albeit often politically correct) investing, others, including some in the Gulf states, are accountable only to autocratic ruler(s) and have been suspected as acting as personal slush funds. On the other hand, managers of Gulf funds must be aware that bad investment decisions may not only cost them their jobs but their heads.Mubadala was a new kind of sovereign wealth fund. Rather than a conservative steward of assets for future generations, it was run more like a leveraged Wall Street hedge fund: borrowing on global markets, investing in complex transactions, and aiming to develop the industries which would sustain the local economy when the oil inevitably ran out. Jho Low saw Al Mubarak, not yet thirty years old, making billion dollar deals on almost his sole discretion, playing a role on the global stage, driving the development of Abu Dhabi's economy, and being handsomely compensated for his efforts. That's the game Low wanted to be in, and he started working toward it.Before graduating from Wharton, he set up a British Virgin Islands company he named the “Wynton Group”, which stood for his goal to “win tons” of money. After graduation in 2005 he began to pitch the contacts he'd made through students at Harrow and Wharton on deals he'd identified in Malaysia, acting as an independent development agency. He put together a series of real estate deals, bringing money from his Gulf contacts and persuading other investors that large sovereign funds were on-board by making token investments from offshore companies he'd created whose names mimicked those of well-known funds. This is a trick he would continue to use in the years to come.Still, he kept his eye on the goal: a sovereign wealth fund, based in Malaysia, that he could use for his own ends. In April 2009 Najib Razak became Malaysia's prime minister. Low had been cultivating a relationship with Najib since he met him through his stepson years before in London. Now it was time to cash in. Najib needed money to shore up his fragile political position and Low was ready to pitch him how to get it.Shortly after taking office, Najib announced the formation of the 1Malaysia Development Berhad, or 1MDB, a sovereign wealth fund aimed at promoting foreign direct investment in projects to develop the economy of Malaysia and benefit all of its ethnic communities: those of Malay, Chinese, and Indian ancestry (hence “1Malaysia”). Although Jho Low had no official position with the fund, he was the one who promoted it, sold Najib on it, and took the lead in raising its capital, both from his contacts in the Gulf and, leveraging that money, in the international debt markets with the assistance of the flexible ethics and unquenchable greed of Goldman Sachs and its ambitious go-getters in Asia.Low's pitch to the prime minister, either explicit or nod-nod, wink-wink, went well beyond high-minded goals such as developing the economy, bringing all ethnic groups together, and creating opportunity. In short, what “corporate social responsibility” really meant was using the fund as Najib's personal piggy bank, funded by naïve foreign investors, to reward his political allies and buy votes, shutting out the opposition. Low told Najib that at the price of aligning his policies with those of his benefactors in the Gulf, he could keep the gravy train running and ensure his tenure in office for the foreseeable future.But what was in it for Low, apart from commissions, finder's fees, and the satisfaction of benefitting his native land? Well, rather more, actually. No sooner did the money hit the accounts of 1MDB than Low set up a series of sham transactions with deceptively-named companies to spirit the money out of the fund and put it into his own pockets. At the centre of all of this skulduggery was a private Swiss bank named BSI. Part of the continuo to this financial farce is the battles between BSI's compliance people who kept saying, “Wait, this doesn't make any sense.” and the transaction side people looking at the commissions to be earned for moving the money from who-knows-where to who-knows-whom.Ultimately, Low's looting pipeline worked, and he spirited away most of the proceeds of the initial funding of 1MDB into his own accounts or those he controlled. There is a powerful lesson here, as applicable to security of computer systems or access to physical infrastructure as financial assets. Try to chisel a few pennies from your credit card company and you'll be nailed. Fudge a little on your tax return, and it's hard time, serf. But when you play at the billion dollar level, the system was almost completely undefended against an amoral grifter who was bent not on a subtle and creative form of looting in the Bernie Madoff or Enron mold, but simply brazenly picking the pockets of a massive fund through childishly obvious means such as deceptively named offshore shell corporations, shuffling money among accounts in a modern-day version of check kiting, and appealing to banks' hunger for transaction fees over their ethical obligations to their owners and other customers.Nobody knows how much Jho Low looted from 1MBD in this and subsequent transactions. Estimates of the total money spirited out of 1MDB range as high as US$4.5 billion, and Low's profligate spending alone as he was riding high may account for a substantial fraction of that.Much of the book is an account of Low's lifestyle when he was riding high. He was not only utterly amoral when it came to bilking investors, leaving the poor of Malaysia on the hook, but seemingly incapable of looking beyond the next party, gambling spree, or debt repayment. It's like he always thought there'd be a greater fool to fleece, and that there was no degree of wretched excess in his spending which would invite the question “How did he earn this money?” I'm not going to dwell upon this. It's boring. Stylish criminals whose lifestyles are as suave as their crimes are elegant. Grifters who blow money on down-market parties with gutter rappers and supermarket tabloid celebrities aren't. In a marvelous example of meta-irony, Low funded a Hollywood movie production company which made the film “The Wolf of Wall Street”, about a cynical grifter like Low himself.And now comes the part where I tell you how it all came undone, everybody got their just deserts, and the egregious perpetrators are languishing behind bars. Sorry, not this time, or at least not yet.Jho Low escaped pursuit on his luxury super-yacht and now is reputed to be living in China, travelling freely and living off his ill-gotten gains. The “People's Republic” seems quite hospitable to those who loot the people of its neighbours (assuming they adequately grease the palms of its rulers).Goldman Sachs suffered no sanctions as a result of its complicity in the 1MDB funding and the appropriation of funds.BSI lost its Swiss banking licence, but was acquired by another bank and most of its employees, except for a few involved in dealing with Low, kept their jobs.This book, by the two Wall Street Journal reporters who untangled what may be the largest one-man financial heist in human history, provides a look inside the deeply corrupt world of paper money finance at its highest levels, and is an illustration of the extent to which people are disinclined to ask obvious questions like “Where is the money coming from?” while the good times are rolling. What is striking is how banal the whole affair is. Jho Low's talents would have made him a great success in legitimate development finance, but instead he managed to steal billions, ultimately from mostly poor people in his native land, and blow the money on wild parties, shallow celebrities, ostentatious real estate, cars, and yachts, and binges of high-stakes gambling in skeevy casinos. The collapse of the whole tawdry business reflects poorly on institutions like multinational investment banks, large accounting and auditing firms, financial regulators, Swiss banks, and the whole “sustainable development” racket in the third world. Jho Low, a crook through and through, looked at these supposedly august institutions and recognised them as kindred spirits and then figured out transparently simple ways to use them to steal billions. He got away with it, and they are still telling governments, corporations, and investors how to manage their affairs and, inexplicably, being taken seriously and handsomely compensated for their “expertise”.

Tom Wright and Bradley Hope’s Billion Dollar Whale is an imperfect but still essential read for those interested in the 1MDB scandal and chronicles of financial malfeasance and fraud in general. But there are some limitations to be aware of in this otherwise briskly reported book: Unlike other recent chronicles of lies, power, and politics gone wrong like Bad Blood, Black Edge, or Dark Money, you will not find a meticulous appendix or a voluminous list of citations and references. Instead, Wright and Hope focus the bulk of their narrative on the life and lies of Jho Low, the man who orchestrated the massive theft of money from 1MDB, the so-called sovereign wealth fund.Deciding to focus on Low is perhaps the greatest strength and weakness of the book. The authors tell at times exceedingly long and vivid anecdotes of Low indulging in his vices (parties, celebrities, gambling, mansions, art, jewelry, etc.), so much so that there are times where one wishes Wright and Hope brought the same narrative detail and word count to the arcana of their financial crimes. For example, in one early section of the book Wright and Hope cite the first of many “rumors in banking circles” as early as 2009 that “Low had siphoned” millions in bond money in one of his earliest schemes. It would have been helpful to learn more about who and how such “rumors” were propagated and why no one did anything. Well before the end of the book, the long accounts of Low’s debauched parties in Aspen, Las Vegas, the yacht Equanimity he had built with stolen money, and elsewhere begin to blur together.As Low’s crimes grow and more institutions and individuals are brought into his circle of graft his parties risk overshadowing the more important part of the book: how these crimes were possible, what kind of culture and systems made such lies go unchecked for so long, and how many of the 1MDB scandal’s perpetrators still walk free and unpunished even today. Low proved astonishingly adept at taking advantage of lax oversight, making the right social favors, and the willful ignorance of corruption in the face of political power and money. But none of his crimes would have been possible had he not been aided and abetted by those in power and used to the systemically corrupt politics and ethnic tensions in Malaysia who deployed money meant for its citizens to a global coterie of bankers, lawyers, businessmen, and hangers-on all too eager to take some of the cash Low was bringing to bear and ignore glaring compliance issues.Finally, the most disturbing and saddening conclusion the Wright and Hope’s reporting seems to reach is how such stories of crime and corruption are not solely the problems of developing countries. The problem is global, the rot is widespread, and the sickness runs deep. My running tally of the banks in the book whose internal compliance and due diligence teams raised issues only to have them overridden includes not just Goldman Sachs, but JP Morgan Chase, Coutts, Deutsche Bank, Wells Fargo, BSI (a small Swiss bank), and more. Both accounting firms KPMG and Deloitte issued audits that allowed the fraud to continue further. White shoe law firms like Shearman & Sterling helped facilitate the flow of hundreds of millions of stolen dollars into the United States to launder ill-gotten gains. This is an incomplete list of institutions where leaders chose to ignore warning signs. The perpetrators have used their power and money to fight back against the law, both internationally and domestically. Justice has yet to be rendered on Low and his conspirators. Wright and Hope suggest the dismal possibility that few individuals will be held accountable and that these large companies have adapted to weather even billions in financial penalties, risking a repetition of the same mistakes.

excellent, read it three times

Ce qui est essentiel est que le livre a été bien livré. Le livre est intéressant à lire et décrit bien le vol de plusieurs milliards de USD au détriment du gouvernement malaisien.

Very entertaining story. Couldn’t put it down.

Excelente libro de periodismo de investigación. Bien explicado. Engancha desde la primera hasta la última página.

Good read and well written. Authors have spent a great deal of time on research and it shines through during the read.