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Goldman Sachs Restates Q2 Earnings After Setting Aside $2.96 Billion in 1MDB Legal Costs

Goldman Sachs said it will set aside nearly $3 billion in legal costs linked to scandal at a Malaysian sovereign wealth fund and restate its second quarter earnings.

Goldman Sachs Group  (GS) - Get Goldman Sachs Group, Inc. (GS) Report restated its second quarter profits Friday after booking a near $3 billion charged linked to a corruption scandal at Malaysia's sovereign wealth fund.

Goldman said its second quarter profits now show net earnings of $197 million, down from the $2.25 billion first released on July 15. The change comes as Goldman said its legal provisions rose to $2.96 billion following a July 24 settlement with the Malaysian government, Goldman said in a Securities and Exchange Commission filing.

Goldman agreed to pay $2.5 billion in penalties, and promise the return of a further $1.4 billion in proceeds from the assets of 1Malaysia Development Bhd, or 1MDB, the sovereign wealth fund at the heart of the scandal that were seized by governments around the world.  

Goldman Sachs shares were marked 0.61% lower in early trading following the earnings restatement to indicate an opening bell price of $203.00 each, a move that would extend the stock's year-to-date decline to around 11.7%.

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Goldman's alleged role in the so-called 1MDB scandal, for which it helped raise $6.5 billion, ha also led the U.S. Attorney's Office in Brooklyn to file criminal charges against two Goldman bankers seeking "significant fines, penalties and other sanctions", according to an SEC filing made by the firm on November 2, 2018.

The scandal, which was the subject of probes in six different countries, also involved a former DoJ employee, George Higginbotham, who plead guilty in 2018 to charges that he made false statements to U.S. banks about funds being transferred from abroad and helped use those funds to lobby against the DoJ's investigation into 1MDB.