U.S. delays returning more 1MDB funds to Malaysia, sources say

KUALA LUMPUR (Reuters) - -The U.S. Department of Justice has delayed the return to Malaysia of another $240 million of recovered money allegedly stolen from the 1MDB sovereign fund, two sources with direct knowledge of the matter said on Friday, with one citing political uncertainty.

FILE PHOTO: A man covers his mouth as he walks past a 1 Malaysia Development Berhad (1MDB) billboard at the funds flagship Tun Razak Exchange development in Kuala Lumpur, Malaysia, February 27, 2015. REUTERS/Olivia Harris

Malaysia was plunged into turmoil when 94-year-old prime minister Mahathir Mohamad quit on Feb. 24.

He was replaced on Sunday by Muhyiddin Yassin, whose coalition includes the former ruling party that was voted out in 2018 amid accusations of corruption over 1MDB.

The U.S. Department of Justice says over $4.5 billion was looted from the fund under United Malays National Organisation (UMNO) prime minister Najib Razak, who is now on trial for corruption.

Since 2016, the department has filed civil lawsuits seeking to seize about $1.7 billion in assets allegedly bought with stolen 1MDB funds.

Last May, the United States began returning some of the recovered funds. The first installment was nearly $200 million.

The DOJ had initially been scheduled to return the next payment of recovered funds to Malaysia on Feb. 19, but there were technical reasons the transfer did not happen, the two sources said.

The total amount was around 1 billion ringgit ($240 million), one source said.

But once Mahathir resigned, it was decided to hold the payment due to uncertainty over what would happen next, one source said. The sources did not want to identified as they were not authorized to speak to media.

A DOJ spokesman declined to comment.

Malaysia’s finance ministry redirected questions to the attorney general’s chambers, which did not immediately respond to a request for comment.

The sources said they were not aware of DOJ’s next steps.

The funds returned go into a special fund at Malaysia’s finance ministry and are meant to be used to pay 1MDB’s bondholders.

American and Malaysian investigators have said Najib received about $1 billion of the stolen funds 1MDB funds. He has pleaded not guilty and says he was misled by Malaysian financier Jho Low and other 1MDB officials.

It was only after Najib’s unexpected defeat in the 2018 elections that the 1MDB investigation was reopened in Malaysia and trials began.

Goldman Sachs and some of its executives are among the many charged for their role as underwriter and arranger of three bond sales that raised $6.5 billion for 1MDB. Three units of Goldman have pleaded not guilty to charges.

Najib told Reuters this week that he expected an atmosphere more conducive to a fair hearing now that Mahathir has gone.

Muhyiddin has not talked about the 1MDB cases but has vowed to fight graft.

Two senior officials in the Mahathir administration fighting graft - the attorney general and the chief of the anti-corruption commission - quit in the last week after Mahathir’s resignation.

Additional reporting by Rozanna Latiff in Kuala Lumpur and Chris Prentice in Washington; Editing by Matthew Tostevin and Kim Coghill