Scandal-hit Malaysian fund insolvent: Finance minister

KUALA LUMPUR: A Malaysian sovereign wealth fund at the centre of a major scandal that helped to topple the former government is insolvent and its chief is "utterly dishonest", the new finance minister said Wednesday.

Ousted leader Najib Razak, his family and cronies are accused of looting billions of dollars from the fund, 1MDB, in a sophisticated fraud that stretched from the Cayman Islands to Switzerland.

Public disgust at the corruption allegations played a big part in the shock defeat at polls this month of Najib's long-ruling coalition to an alliance headed by his 92-year-old former mentor Mahathir Mohamad.

Najib and 1MDB, which is the subject of money-laundering investigations in several countries, deny any wrongdoing. 

Finance Minister Lim Guan Eng met with people involved in the fund and said in a statement its directors had confirmed that the fund was insolvent and "unable to repay its debts".

One of the directors had informed him a purported investment of 9.8 billion ringgit ($2.4 billion) of 1MDB money overseas -- which would be enough to service the fund's debts for several years -- was in fact a "scam", Lim said.

1MDB president Arul Kanda claimed he was uncertain as to the value of the investments or whether they even existed, he said.

"It is completely unbelievable that a highly paid and 'experienced' investment banker can be so irresponsibly clueless as to not know whether 9.8 billion ringgit worth of investments are even real," Lim said.

"I have found Arul Kanda to be utterly dishonest and untrustworthy."

The minister added that he had asked the finance ministry's legal advisers to review his position as president of 1MDB.

PricewaterhouseCoopers is to be appointed to conduct an audit of 1MDB, Lim said.

Mahathir -- who had a first stint as premier from 1981-2003 before coming out of retirement to take on scandal-hit Najib -- and his allies focused on the 1MDB allegations during their successful election campaign.