What is it about stories like The Great Gatsby, Crazy Rich Asians, The Wolf of Wall Street, Bad Blood and Bernie Madoff that draw us in? Is it the rags-to-riches narrative that underlies the material excesses? Rather, is it the voyeur's look into a world of the ultra-rich, where the stories of gluttonous consumption, debauchery, and greed provide us a simultaneously scandalous and shocking portrait of a seemingly fantastic life that seems normal to them? Either way, these stories have become part of American culture, despite the 2008 recession and the Bernie Madoffs of the world, for better or ill. Further blurring fiction and reality is the real-life story of Jho Low, a Malaysian financier who became a billionaire by engaging in a fraud of mind-boggling, global proportions via the overseeing of the multi-billion dollar Malaysian sovereign wealth fund known as 1Malaysia Development Berhad (1MDB). Wall Street Journal journalists Bradley Hope and Tom Wright chronicle the unlikely rise of this real-life Gatsby in Billion Dollar Whale: The Man Who Fooled Wall Street, Hollywood, and the World (2018).
Before 1MDB, Jho Low started off as a Wharton graduate from a moderately wealthy family in the Malaysian coastal state of Penang, a former British colonial outpost. Heir to a modest garment fortune, he aspired to more, the lifestyles of the uber-rich Americans, Asians, Europeans and Middle Easterners he rubbed elbows with during his education. How would he achieve the glamor and glitz he so desired? First, it involved cultivation of the powerful. In this case, who you know seems to override what you know, especially in the world of 21st century finance. Low worked minor deals, positioning himself as a fixer, giving the appearance of his wealth by his ties with powerful benefactors, like Abu Dhabi royalty and Saudi Arabian financiers. It would be United Arab Emirates ambassador to the United States Yousef Al Otaiba that would provide the in to Low's eventual and nearly $5 billion 1MDB heist. After his early success in 2009 as middle-man to the Iskandar Land Project, an ambitious development project that aspired to give Malaysia a financial hub to rival that of Singapore. His Middle Eastern contacts introduced Low to Malaysian prime minister Najib Razak, who'd become Low's primary patron as the 1MDB scam took shape.
Purporting to be a vehicle for strategic development and economic prosperity, 1MDB raised $10 billion dollars from investors all over the world. Then, around $5 billion went missing, gradually, partly to finance the prime minister's political funds and his family's lavish lifestyle and the rest to Low and his associates for their outrageous parties costing many times over in one night of extravagance what many families make in a year or many years (or a lifetime). How were the banks fooled? While the financial minutiae are dense throughout Billion Dollar Whale, lending credence to the authoritative nature of the account built on three years of investigative work, it ultimately came down to a complex stream of arcane transactions made between offshore shell companies (of Panama Papers fame), the accounts of Low's family and associates, and 1MDB that gave the appearance that 1MDB had the funds to pay its bills when the funds were actually nearly non-existent. The fund was really in the red, but for the scheme to continue, needed to convince investors that they were financially stable. So when bank compliance departments, whether with Goldman Sachs or BSI Singapore raised questions about these transfers, Low was able to weigh in with the help of his contacts, giving the illusory weight of a legitimate Middle Eastern fund or other business entity to the transaction to ease bank jitters over the shady documentation provided.
In 2014, the first reports of financial malfeasance of 1MDB began to emerge, with more following as Low became sloppy in disguising his suspicious and bold transfers through major banking institutions. The scope of investigations in Switzerland, Malaysia, the United States and elsewhere widened enough, scooping up Low's associates left and right, bringing down even the Malaysian prime minister Najib Razak and his family when he was voted out in May 2018 despite strongman tactics of intimidation and killings targeting the opposition in Malaysia and Low's use of a PR firm to burnish his image as a generous philanthropist to counter the negative publicity. As of today, Jho Low remains on the loose and the financial repercussions of the staggering debt on Malaysia's economy are beginning to be felt, even as the U.S. Justice Department continues its wide-ranging investigation into this massive instance of financial fraud.
What then, is the main message to take away from Billion Dollar Whale? While we may have shored up the kind of risky lending that caused the Great Recession, new unregulated vehicles have emerged (offshore accounts and cryptocurrency), combining with the traditional impetus of profit-making and a greatly interconnected (and unequal) global economy. This is dangerous ground, when individuals and companies play fast and loose with the rules and gamble with the future of the international financial system and the financial regulatory frameworks used to hold them to account are being weakened (Dodd-Frank, anyone?). Whether or not Low's offshore account-driven scheme will become the new model for aspiring frauds out there, Bradley and Hope's Billion Dollar Whale nonetheless makes the case for tighter regulatory oversight of financial institutions.
Works Cited:
Hope, Bradley, & Wright, Tom. (2018). Billion Dollar Whale: The Man Who Fooled Wall Street, Hollywood, and the World. New York: Hachette Books.
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