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Malaysian financier Jho Low has been on the lam. He was charged with multiple counts by the governments of the United States and Malaysia in connection with a money-laundering scheme that raised billions of dollars from banks and wealthy investors. Wall Street Journal reporters Tom Wright and Bradley Hope unwind the tale of greed and excess in their new book, Billion Dollar Whale: The Man Who Fooled Wall Street, Hollywood and the World, which details the lavish lifestyle of the man who pulled off the scheme.
In addition to Low, former Malaysian Prime Minister Najib Razak, two Goldman Sachs bankers and even Low’s father have been implicated in the scheme, which included investments in the Hollywood film industry. Hope spoke to the Knowledge@Wharton radio show on Sirius XM about the book.
An edited transcript of the conversation follows.
Knowledge@Wharton: Can you give us the backstory on Jho Low and the 1MBD fund?
Bradley Hope: Jho Low is an incredible figure. When this whole thing started, he was just a 20-something financier who had never had a real job before. He was straight out of Wharton, started his own private equity company and became this up-and-coming wheeler-dealer in Malaysia. One of the things that he picked up along the way was a fascination with sovereign wealth funds. He met some people in Abu Dhabi and got to see how one of these amazing entities worked with their many billions of dollars and their great influence over investments and all kinds of things.
He essentially combined his wheeler-dealer mentality with a gift for networking. He managed to get close to the prime minister’s family in Malaysia — at the time, Najib Razak actually wasn’t the prime minster yet — but he got in touch with the family and convinced them to start a new sovereign wealth fund. Rather than a sovereign wealth fund full of savings, it was a sovereign wealth fund that borrowed money to do its projects. He got them to create this sovereign wealth fund, and he secretly controlled it from behind the scenes.
Knowledge@Wharton: Did the future prime minster realize what was going on?
Hope: It’s hard to know exactly what was going on inside people’s minds. [But] it does seem that, in the very initial stages, the prime minister didn’t know the full scope of what Jho Low was planning. Over time, there are increasing signs of his awareness and a lot of effort to cover things up. It suggests a greater knowledge at the later stages than the beginning stages.
Knowledge@Wharton: It appears that Low had quite a love for gambling as well.
Hope: He had great appetites for all the luxuries of the world. He loved gambling, especially baccarat, and he would easily, in a night, spend millions of dollars at a casino. He loved night clubs where he would also spend a lot of money buying champagne. He loved buying gifts for people.
“He loved gambling, especially baccarat, and he would easily, in a night, spend millions of dollars at a casino.”
I like to joke with my co-author, Tom, that probably during the peak years of Jho Low, he accounted for an actual percentage of Hermes Birkin bag sales and Cristal champagne sales. That’s where the title “the whale” comes from. When he started showing up in these night clubs, they have a term for a guy [like him] who can make their numbers in a night, and they call him the whale. They will do everything in their power — literally fly helicopters [and do whatever] it takes — to keep them in that club.
Knowledge@Wharton: I guess that does show something about his personality that he needed to have this attention. He needed to be a part of that social scene to do what he wanted to do.
Hope: He probably enjoyed planning these events even more than attending them. He was really someone who was involved in every detail of a party that he threw, for example, down to the flowers and the glasses on the table and the types of alcohol being served. But it’s also a strategic thing. His charm, if you can call it that, was that he was the guy … who would change your life.
He could change your life in small ways or big ways. A small way would be to give you these life experiences that you could never imagine. For example, in one of the parties he threw, he got all these celebrities together. They flew on a 747 that he chartered to Australia. They spent a lovely week in Australia, going gambling, being on a yacht and all that sort of thing. Then they did the countdown for New Year’s, saw the fireworks. Then they piled back into the 747. They raced across the Earth and landed in Las Vegas, only to celebrate New Year’s again on the same night in Las Vegas. … It’s a pretty legendary party.
… He was extremely generous with other people’s money. If you were a co-conspirator in this whole scheme, you could go from a normal salaried person to a millionaire. Or if you were already a millionaire, you’d become a hundred millionaire.
Knowledge@Wharton: What is the state of the investigation right now?
Hope: This thing has been going on for a long time. Tom and I really started covering this in 2015. That was the initial peak, when the FBI started a big investigation. Since then, all kinds of things have happened, but this year has been the big year for developments.
First of all, the Malaysian government changed in a complete surprise election. That is what initiated all the other changes. Because under the old regime, where the prime minister was close to Jho Low, everything was being covered up. He was preventing investigations. He was actively denying anything had happened. As soon as the government changed, they opened everything up again and started cooperating with the foreign investigators. Things started to accelerate very quickly from there.
The [former] prime minister of Malaysia has been charged with many crimes. His wife has been charged with crimes. Inside their home, they found tens of millions of dollars in cash and tens of millions of dollars of jewelry and handbags and watches and things. Really, an incredible amount of luxury goods and an [inexplicable] amount.
More recently, Jho Low has been indicted in the United States. He’s been indicted in Malaysia. There are requests to Interpol for him to be arrested. The Goldman Sachs partner who was involved in this whole scheme pled guilty in New York to his role and confirmed the scheme was real. Another one of his Goldman colleagues was arrested in Malaysia on a warrant from the United States. Then there’s this new development where a former Justice Department small-time guy pled guilty to being involved as well. While he was at the DOJ, he was helping funnel tens of millions of dollars into the United States as money to use to lobby the U.S. government to cancel the whole investigation.
Knowledge@Wharton: What role did Goldman Sachs play?
Hope: They played a crucial role. 1MDB, this sovereign wealth fund that Jho Low thought up and ran from behind the scenes in Malaysia, had no savings. It just basically raised money on its sovereign status. People would lend to it thinking that the government of Malaysia is behind this, they’re going to make good on any debt payments if they have to, so it amassed all this debt. One of the biggest chunks of the debt was raised by Goldman Sachs. It was three bonds worth $6.5 billion. They probably raised over the life of the fund $13 billion, so it’s a little bit close to half.
What’s funny about that debt that they raised is Goldman Sachs got paid approximately $650 million in fees and related profits, which is an extraordinary profit. On a bond issuance, you might typically see about 1%. This was 10%. They’ve said, ‘Listen, the client wanted it fast and confidential.’ What’s obviously under scrutiny is how did this deal come about? Were there red flags? In our view, there were many red flags.
“He was extremely generous with other people’s money.”
Separately, just the role [played by Tim] Leissner, who was a partner at Goldman Sachs [raised red flags]. The highest echelon of Goldman Sachs is a partner. According to his guilty plea, he received $200 million [that was deposited] in shell and offshore accounts, and he paid bribes to other people. He was really a core active corrupter in this deal. Meanwhile, he was constructing these bonds. So, there are a lot of questions about Goldman’s oversight on employees and how they look at red flags.
For example, in one of the bond issuances, 1MDB said, “Please place [the money] in our Swiss bank account.” A lawyer for Goldman Sachs actually wrote a letter saying, “I’m a little bit nervous about this. Why does 1MDB have an account at a small Swiss bank that almost exclusively deals with individuals, not giant sovereign wealth funds?”
There is a lot of that stuff that’s being looked over and scrutinized, and there is a coalescing belief that, at a minimum, Goldman Sachs will have to forfeit all those profits, the $650 million. But there are so many different regulators looking at it. There’s also civil litigation against Goldman Sachs, for example, by one of these Abu Dhabi sovereign wealth funds that has a role in this whole affair. People are wondering if Goldman Sachs is going to get hit pretty hard for this. It’s hard to say at the moment where that’s headed.
Knowledge@Wharton: Can you talk about Jho Low’s connections to Hollywood and how he was able to invest in the movie ‘The Wolf of Wall Street’?
Hope: In 2009, when the 1MDB affair first took off, that’s when the first $700 million was siphoned away. Within weeks of getting that money, Jho Low was in Las Vegas with Leonardo DiCaprio, hanging out with these Playboy playmates and playing baccarat. He wasn’t shy about wanting to meet celebrities right away, as many as he could. He went on to become really well-known among celebrities, including a lot of rap stars, super models, a lot of the brand name people like Usher and Paris Hilton.
Now, his appeal to people is different. For someone like Paris Hilton, for example, he was a great friend to have because you could really have a great time with him. But he also paid people appearance fees, essentially, to hang out with him or to go to his parties. They could make $100,000 in a night just as a fee. For people like Leonardo DiCaprio, who are not as attracted to some kind of a fee like that, Jho Low was a potential source of film funding. Leonardo DiCaprio and Martin Scorsese had long been obsessed with this idea of converting the memoir of Jordan Belfort, called ‘The Wolf of Wall Street,’ into a film. But the Hollywood production houses were skeptical because it was very explicit. There were questions about whether it was celebrating that lifestyle of the Wall Street excesses or condemning it.
Jho Low said that they would just write a check for the whole thing, and they did. They were an open checkbook for that film. There are a lot of little funny details. For example, Scorsese, who’s obviously a great director, wanted to crash a real Lamborghini. In a lot of films, that would be an area where they would try to avoid crashing a real Lamborghini. They would find an already wrecked one or a model or whatever. But he convinced them that they needed to wreck a real Lamborghini, and they said, “OK, go for it.”
Knowledge@Wharton: The U.S. government is trying to find him and bring him back for prosecution. Besides Malaysia, are any other governments involved?
Hope: The other government that’s involved is Abu Dhabi, the capital of the United Arab Emirates in the Persian Gulf. One of the key participants in the fraudulent part of this whole scheme there called Khadem al-Qubaisi. When 1MDB was raising this debt, they did a deal with another sovereign wealth fund in Abu Dhabi where that fund guaranteed the 1MDB debt. Ostensibly, that would allow them to raise money at a cheaper rate. They were going to give some options to this other fund that would become valuable to them.
“Goldman Sachs got paid approximately $650 million in fees and related profits, which is an extraordinary profit.”
But what actually happened was they guaranteed this thing, and then they did this complex transaction where they kicked back a vast portion of these bonds to a company that was like an off-balance sheet vehicle belonging to that Abu Dhabi fund. … The top guy at the Abu Dhabi company … was one of only two people who knew about it. Basically, they were able to steal billions of dollars, and he received about $500 million for that role. That’s another big embarrassment to the government of Abu Dhabi. He’s actually in prison there, awaiting charges.
Knowledge@Wharton: This scheme plays out over several years. If there were red flags, why wasn’t it stopped earlier on?
Hope: There are so many reasons. There are auditors who looked the other way in Malaysia. There are government officials who allowed this to happen. There are bankers who tried not to look too deeply into it. Everything about 1MDB and everything about Jho Low was immensely profitable. If you’re a bank working with him, if you’re a law firm working with him, if you’re anyone, this is the best client you’ve ever had. I think that is the core reason why, ultimately, it kept going and going and going despite red flags, despite rumors in Malaysia: “Something’s wrong with this fund. It doesn’t make sense.”
Knowledge@Wharton: Do you think Low will be brought to justice at some point?
Hope: If you look at the different phases, there’s the beginning, which is the creation of the fund, the living large. Then there’s the collapse of it, the investigations begin. Then there’s this period where he’s on the run, developing what turns out to be these really deep relationships with the Chinese government. He’s believed to be in China and under their protection. The reason for that is that he managed to turn the 1MDB crisis into an opportunity for China. In Malaysia, the prime minister had this problem, there was money missing, he was telling people that it wasn’t missing and relying on being re-elected. China stepped in and participated in all of these infrastructure deals that allowed them to kick back money to the government. They used that to plug some of the holes and to show there’s nothing here, there’s no consequence to this, it’s all a conspiracy, it’s not real. In exchange, Malaysia tilted very strongly towards China.
It keeps taking these higher-stake scenarios in the whole affair. Because of that, I think it might be hard for China to give him up even if they wanted to, because what he knows about China’s role and how they did it and the mechanics of it are very sensitive. There are two schools of thought: One is that China and Malaysia will do a deal; the other is that he’ll just stay in China for a really long time.
Knowledge@Wharton: You also talk in the book about some of the people involved in the investigation, including the FBI special agents.
Hope: Those guys are harder for us to know a lot about. That investigation is still ongoing. But in the course of all our reporting, we were able to learn more and more about the investigators leading this up. They must be having such an incredible time. Your typical white-collar crime investigation might be exciting, but a lot of it is mundane financial research. This case, every time it looks like it’s going to quiet down, it just steps it up a notch. It goes from a financial crime to an international espionage case, or recently in the United States, into an effort to corrupt people close to the presidential administration. It keeps escalating, so we don’t really know what’s to come. At this point, nothing will surprise me.
Knowledge@Wharton: His Hollywood connections aside, did Low have connections in other sectors?
Hope: In government, especially. I guess maybe it’s like the phases of wealth. At one point, he realized, I’ve got all the money in the world, I’ve got all the celebrity friends, but what I’m really interested in is political power. There was a time where he became sort of obsessed with the Obama administration. He got close with some of these fundraiser types who were instrumental in the Obama campaign, and he did some deal with those guys.
He was able to visit the White House, attend the holiday party, and he arranged for Leonardo DiCaprio and Martin Scorsese and his other co-filmmaker to go to the White House and present an early copy of ‘The Wolf of Wall Street’ to President Obama. Within Asia, within the Middle East, he really became interested in the powerful people and figuring out how they could be useful to him and him useful to them.
Knowledge@Wharton: It is an amazing aphrodisiac when you’re able to live that kind of lifestyle. It’s an incredible story.
Hope: There’s also a sad side to it all. He lives this crazy lifestyle. He has a private jet and would circumnavigate the globe every six weeks just going from place to place, staying in hotels, penthouse hotels and apartments. I don’t get the impression that he was [doing] particularly well. He started becoming a bit ill. He couldn’t sleep properly and became more overweight.
Even today, our best understanding of him is that he lived a frantic lifestyle. He’s got all these phones before him, like six or seven phones, and he’s constantly talking to people, wheeling and dealing, trying to last another day, to keep this thing going. But he doesn’t really sleep, doesn’t really do anything else other than to prolong this affair and then maybe wander around and eat a lot of fast food. It doesn’t sound that luxurious after all.