Malaysia files charges against Goldman Sachs

Malaysian authorities filed criminal charges against Goldman Sachs on Monday, saying the Wall Street bank was involved in a conspiracy to launder $2.7 billion from an investment fund.

The charges escalate the legal troubles facing Goldman Sachs.

U.S. authorities had filed criminal charges against former Goldman Sachs employees, but this is the first time the New York bank has been directly blamed for wrongdoing.

'Having held themselves out as the pre-eminent global adviser ...,

the highest standards are expected of Goldman Sachs,” Malaysian Attorney General Tommy Thomas said in a statement. 'They have fallen far short of any standard.”

Goldman Sachs has said it is cooperating with the investigations, and it denied wrongdoing.

'We believe these charges are misdirected and we will vigorously defend them and look forward to the opportunity to present our case,” the bank said in a statement.

After spending years attempting to build its reputation after the global financial crisis, the accusations that Goldman was involved in an multibillion-dollar fraud could shake confidence in the bank once again, industry analysts said.

'What I am watching for is contagion,” said Ken Leon, director of equity research at CFRA.

'Could it be one of the regulatory agencies in Washington, a House committee in Congress? There are a lot of ways to go, and Goldman can be an easy target. I just don't think this goes away quickly.”

The case focuses on 1Malaysia Development Berhad, called 1MDB, a government-controlled fund that aimed to pursue economic-development projects for Malaysia. Goldman arranged $6.5 billion in bonds for the fund in 2012 and 2013.

But according to Malaysian and U.S. authorities, Goldman secured the work with the help of bribes arranged by two former employees and others.

Goldman made about $600 million in fees from the deals, 'which was several times higher than the prevailing market rates and industry norms,” Thomas said in a statement.