A former Goldman Sachs executive, Tim Leissner, was handed a two‐year prison sentence Thursday by a federal judge in New York for his central role in the sprawling 1Malaysia Development Berhad (1MDB) corruption scheme. The sentencing marks a high‐profile denouement for Leissner, who once oversaw Goldman’s Southeast Asia operations and admitted in 2018 to conspiring to violate the Foreign Corrupt Practices Act (FCPA) and laundering money tied to the multibillion‐dollar misappropriation from Malaysia’s government investment vehicle.

Judge Margo K. Brodie, presiding over the case in federal court in Brooklyn, underscored the “brazen and audacious” nature of Leissner’s conduct even as she acknowledged his extensive cooperation with U.S. prosecutors. In her remarks, Brodie noted that while Leissner’s assistance in building the case against co‐conspirators merited leniency, it did not eclipse the gravity of orchestrating illicit transactions at the highest levels of multiple governments.

Leissner, 55, who had served as Goldman’s chair of investment banking in Southeast Asia, stood quietly as the sentence was announced. Before the ruling, he read a prepared statement in which his voice cracked with emotion. “First and foremost, I offer my sincere apology to the people of Malaysia,” he said. “I deeply regret my actions.” His lawyers had urged a lighter punishment, highlighting his early guilty plea, steady cooperation, and the personal toll the scandal inflicted on his health and family life. Prosecutors, however, maintained that only a custodial term could adequately reflect the scope of the wrongdoing and deter other bankers from similar abuses.

Background of the 1MDB Scheme

Launched in 2009 by Malaysia’s then‐Prime Minister Najib Razak, 1MDB was intended to spur economic development through strategic partnerships with global firms. Instead, investigators later discovered that approximately $4.5 billion was siphoned through a labyrinth of shell companies, offshore accounts, and phony transactions. A significant portion of those diverted funds flowed into luxury real estate, art purchases, and political campaigns, most notoriously facilitating lavish spending by financier Jho Low, now a fugitive.

Goldman Sachs played a pivotal role in raising $6.5 billion in bond proceeds for 1MDB between 2012 and 2013. Leissner worked alongside Malaysian financier Jho Low to structure the bond deals. Instead of directing the money to legitimate development projects, a substantial slice was funneled to Low’s personal accounts. Low then streamed funds into Hollywood films, superyachts, and high‐fashion shopping sprees. As the scandal unfolded publicly in 2015, global authorities launched simultaneous probes from New York to Kuala Lumpur.

Leissner’s downfall began in October 2018, when he abruptly resigned from Goldman during a holiday trip to Asia. Moments later, U.S. agents arrested him in Los Angeles. He swiftly pleaded guilty to conspiracy charges, admitting that he had solicited and accepted millions of dollars in bribes from Low, funneling the payola through secret offshore bank accounts. In exchange for his cooperation, Leissner entered into a cooperation agreement with U.S. prosecutors, offering testimony in trials of other suspects and providing extensive documentation of communications with Goldman colleagues, foreign officials, and intermediaries.

Among those whom Leissner helped prosecutors pursue was Roger Ng, a former Goldman banker based in Malaysia. Ng, who had facilitated some of the 1MDB bond transactions, was subsequently extradited to the United States, convicted of conspiring to launder money, and in 2022 sentenced to a decade in prison. He is now serving his sentence in Malaysia while assisting local investigators. Leissner also provided testimony in U.S. proceedings against Jho Low, although Low remains at large, reportedly hiding in a Middle Eastern jurisdiction.

Reaction in Malaysia and Goldman’s Response

The Malaysian government, still recovering assets stolen in the 1MDB debacle, reacted strongly to the light prison term. Johari Abdul Ghani, who chairs Malaysia’s 1MDB Asset Recovery Task Force, said the sentence “does not commensurate with the level of planning and deception that Leissner exhibited. He was one of the masterminds facilitating this massive financial crime.” Many Malaysian civil society groups echoed that sentiment, arguing that Leissner’s role in enabling the fraud justified a harsher penalty.

In contrast, Leissner’s defense team stressed that his cooperation had led to more than a dozen convictions, the recovery of hundreds of millions in stolen assets, and the dismantling of complex criminal networks. His lead counsel, Henry Mazurek, noted after sentencing that Leissner was prepared to serve his term and “continue his future life of good works and care for his family.” Leissner’s daughter and wife, both present in court, embraced him tearfully as he was led away to begin his sentence.

Goldman Sachs, which in 2020 paid a record $2.9 billion fine to U.S., U.K., and Malaysian authorities, issued a brief statement reiterating that Leissner “deceived his colleagues and violated Goldman’s core values.” The Wall Street bank also highlighted changes made after the scandal surfaced, including enhanced due diligence on high‐risk clients and an overhaul of its controls around client screening. In addition to the $2.9 billion settlement, Goldman’s Malaysian subsidiary pleaded guilty to criminal charges, and the firm clawed back millions in bonuses and stock awards from senior executives.

Broader Implications and Asset Recovery Efforts

Leissner’s sentencing is the latest chapter in an international effort to hold individuals and institutions accountable for 1MDB’s collapse. Beyond criminal penalties, U.S. and foreign authorities have pursued civil forfeiture actions to seize properties, artwork, and other assets purchased with diverted funds. Notable recoveries include an $18 million Leonardo da Vinci sketch and a $250 million Park Lane residence in New York. Payment of settlement fines by Goldman contributed significantly to Malaysia’s eventual fiscal stabilization.

The United States Department of Justice (DOJ) declared the 1MDB investigation its largest-ever kleptocracy prosecution, ultimately returning more than $1 billion to Malaysia. The DOJ’s strategy combined criminal charges against individuals like Leissner and Najib Razak with civil suits to forfeiture ill-gotten gains. In March 2024, a federal appeals court upheld a lower court’s order for a vast array of seized assets to be repatriated to Malaysia, setting a precedent for global anti‐corruption enforcement efforts. Meanwhile, the United Kingdom’s Crown Prosecution Service and Swiss authorities have also pursued parallel asset recovery initiatives.

Najib Razak, who served as Malaysia’s prime minister from 2009 to 2018, was convicted in 2020 of abuse of power and criminal breach of trust for receiving approximately $10 million in illicit funds from 1MDB. After his conviction was upheld by Malaysia’s top court, Najib was sentenced to 12 years in prison, although Malaysia’s Pardons Board later reduced his penalty. He is currently appealing to serve his remaining sentence under house arrest, erecting significant domestic political controversy.

Leissner’s Personal Toll

In open court, Leissner described how his life unraveled following his resignation and arrest. Once a rising star credited with expanding Goldman’s presence in Asia, he testified that he lost his freedom, his marriage nearly collapsed, and he suffered bouts of depression severe enough to require medication. Lawyers for Leissner portrayed him as a remorseful figure haunted by his choices, who turned over reams of evidence to assist the government.

Still, the judge’s decision made clear that personal regret and cooperation could not fully mask the damage wrought by Leissner’s actions. Prosecutors detailed how billions in public funds were diverted to private bank accounts before being used to pay for movie financing, luxury property in Los Angeles, and even funding for parties involving Hollywood celebrities. Leissner’s willingness to flip on some of his former Gold­man colleagues was previously deemed instrumental by the prosecution in building credibility for the broader 1MDB case.

The energetic pursuit and sentencing of Leissner underscore a broader shift in how banks manage compliance and risk. Since 1MDB, major financial institutions have intensified know‐your‐customer (KYC) protocols, beefed up anti‐money laundering (AML) teams, and expanded oversight of politically exposed persons (PEPs). Regulators in the United States, Europe, and Asia have cited the scandal as a cautionary tale, prompting stricter enforcement of the FCPA and enhanced collaboration among international law enforcement agencies.

Within Goldman Sachs, the fallout from 1MDB prompted an internal review that led to the departure of several senior executives, particularly those involved in Asia‐Pacific operations. The bank also restructured its leadership in emerging markets, elevating compliance officers to positions with direct reporting lines to the board. Some observers contend that the reputational damage from 1MDB has permanently altered Goldman’s public image, eroding some of the firm’s erstwhile aura of invincibility.

Leissner’s prison term—scheduled to commence in mid‐July 2025—will conclude in mid‐2027, at which point he faces supervised release and reported restitution obligations tied to disgorged bonuses. While his two‐year sentence is short compared to the decades handed down in other major white‐collar cases, it nonetheless represents a tangible consequence for former bankers who breach legal and ethical boundaries. Leissner’s journey from Wall Street prodigy to convicted felon has become emblematic of the perils that ensue when corporate ambition eclipses compliance.

Looking Forward

As the last of the principal architects of the 1MDB scandal receives a prison term, both U.S. and Malaysian authorities continue to focus on repatriating any remaining assets linked to the corrupt scheme. Meanwhile, international regulators monitor whether the inducements that lured a high‐level executive like Leissner can be fully mitigated through revamped compliance regimes. Goldman Sachs has emphasized that it has moved “beyond” 1MDB, yet the reverberations of the scandal continue to shape the bank’s risk culture and operational protocols.

For Malaysia, the hope is that the conviction and sentencing of foreign intermediaries such as Leissner will reinforce deterrence and bolster confidence in global anti‐corruption coordination. Domestic investors, having witnessed the devastating impact of embezzlement on sovereign wealth, now hold leaders to higher standards of transparency. Yet, political observers caution that many of the 1MDB figures remain at large or immune to prosecution, including certain middlemen in offshore havens.

In New York, Judge Brodie imposed the sentence after two hours of testimony, signaling that, despite the passage of nearly a decade since the 1MDB fund’s inception, accountability was not lost to time. As Leissner is escorted out of the courtroom, his personal saga serves as a cautionary tale: even the most connected banker can find himself stripped of wealth, reputation, and liberty when ethical lapses intersect with international financial crime. The two‐year term—while shorter than many anticipated—cements Leissner’s place in history as one of the few Wall Street insiders whose career ended behind bars for facilitating a global kleptocracy operation.

(Adapted from NBCNews.com)

Amid Tariff Uncertainty, Corporations Turn to Private Credit for Flexible Financing

A wave of tariff-related turbulence has prompted an increasing number of U.S. companies to bypass traditional bank loans and instead secure financing from private credit firms. Since early April—when the Trump administration’s back-and-forth pronouncements on levies against European Union goods and foreign-made electronics roiled markets—borrowers have sought greater certainty and speed in their funding arrangements. Private credit, a $2 trillion industry that has ballooned from roughly $500 million in 2015, has emerged as a preferred source of capital, offering tailored terms and swift execution that appeal to corporations grappling with volatile interest-rate swings and shifting trade policies.

Market Volatility Spurs Flight from Syndicated Loans

As President Trump threatened 50 percent tariffs on EU imports—only to delay implementation to July after intensive negotiations—equity and debt markets displayed pronounced gyrations. Bond spreads widened and leveraged loan pricing deteriorated, leaving many bank-led syndicated deals on shaky footing. “When volatility spikes, banks find it harder to syndicate large credit packages,” observes Mike Koester, a co-founder of the private credit manager 5C Investment Partners and a former Goldman Sachs banker. “Private credit lenders already have committed capital, so they can deploy directly even when the broader loan market is jittery.”

Data from syndicated-loan trackers confirm that U.S. syndicated issuance fell by approximately 15 percent between January and late May 2025 compared with the year-ago period. By contrast, direct-lending transactions powered by private credit providers dipped by only 10 percent during the same interval. Sources at several leading private credit funds and investment banks note that April and May saw a notable uptick in direct-lending volume as borrowers raced to lock in funding before potential tariff escalations undermined their key suppliers or disrupted revenue forecasts.

Illustrative of this trend was Lakeview Farms’ $200 million acquisition financing for Noosa, a premium yogurt maker, announced in early April. Originally, Citigroup had been leading loan talks—intending a syndicated structure—but Lakeview ultimately chose a bilateral facility from Silver Point Capital. Two deal insiders explain that Silver Point offered more flexible covenant packages and a rapid close, crucial as Lakeview sought to finalize its purchase before component-pricing shocks took hold. The private credit loan carried floating pricing tied to the Secured Overnight Financing Rate (SOFR), with reset thresholds that permitted Lakeview to reprice if market conditions improved in the quarter following signing.

In another marquee transaction, private credit giants Blackstone Credit and Apollo Global Management teamed up to underwrite a $4 billion direct-lending facility for Thoma Bravo’s purchase of Boeing’s Jeppesen navigation unit. Rather than navigating a drawn-out syndication, Thoma Bravo leveraged the financial heft of two major nonbank lenders to secure the necessary leverage in a single step. Structuring professionals say the facility’s bespoke covenants—allowing incremental debt for future bolt-on acquisitions and softening certain leverage tests—were unattainable from a traditional bank syndicate during that period of tariff wrangling and uneven secondary trading.

Flexible Structures Win Over Borrowers

Private credit’s growing share of the corporate financing landscape owes much to its willingness to tailor covenants, repayment schedules, and collateral requirements to individual borrower profiles. While banks generally adhere to standardized underwriting templates and rely on a broad syndicate of investors to distribute risk, nonbank lenders can customize terms more freely. “In volatile markets, certainty of funding becomes paramount,” says Kort Schnabel, co-head of U.S. Direct Lending at Ares Management. “Companies facing tariff-driven cost pressures need financing that won’t get pulled or repriced if secondary loan bid-ask spreads blow out overnight.”

Industry participants note that direct lenders typically require higher margins—often 200 to 300 basis points above comparable syndicated rates—but borrowers are willing to pay the premium for speed and stability. Private credit funds often offer covenants keyed to adjusted EBITDA thresholds, sometimes eliminating less critical financial maintenance tests that banks insist upon. Moreover, these lenders frequently accommodate borrower requests for delayed amortization, covenant holiday periods, or the inclusion of springing-liquidity features during episodes of economic stress.

Recognizing the risk of ceding market share, several large Wall Street institutions have quietly expanded their direct-lending initiatives. JPMorgan Chase, Morgan Stanley, and Goldman Sachs have each allocated multibillion-dollar war chests to co-loan with established private credit sponsors or originate middle-market loans directly. Yet bankers concede that, during April and May, many borrowers steered clear of bank-led facilities simply because syndication was slow to materialize. “We were working on multiple deals but couldn’t price them competitively against private credit bids,” says Ted Swimmer, head of capital markets and advisory at Citizens Financial Group, which both competes with and partners alongside nonbank lenders. “At times, we lost transactions because our timelines and terms weren’t as certain as private credit could guarantee.”

Smaller regional banks, meanwhile, struggle to keep pace as they lack the capital reserves and credit bandwidth of megabanks or large asset managers. Post-2008 regulations such as Basel III have raised capital-adequacy requirements, making it more costly for banks to underwrite high-yield loans to debt-laden borrowers. Private credit firms—unfettered by certain bank capital rules—can deploy leverage up to five or six times EBITDA, whereas many banks are constrained to average leverage nearer to four times.

Expanding Pool of Borrowers and Use Cases

In today’s environment of tariff anxiety, a wide spectrum of companies has tapped private credit for funding. Beyond leveraged buyouts, sponsors have used direct loans to finance recapitalizations, dividend recap deals, and growth-capital injections. Even publicly traded businesses with uneven earnings have opted for unitranche facilities—single-document loans blending senior and subordinated components—to maintain flexibility amid uncertain trade negotiations.

Middle-market firms in manufacturing, distribution, and consumer goods in particular have found private credit appealing. Such businesses often faced rapid cost pass-through from steel and aluminum tariffs, then braced for add-on levies as the U.S. threatened levies on European aircraft and automotive shipments. With operating margins already tight, CFOs concluded that negotiating new covenants and repricing risk with a private lender was preferable to rolling the dice on a syndicated process that might collapse if secondary loan trading dried up.

A growing number of technology companies and service-sector businesses have also accessed private credit for longer-term strategic needs. Many venture-backed firms nearing profitability—but not yet candidates for a public bond issuance—have secured unitranche funding to extend their cash runways, invest in research and development, and pursue bolt-on acquisitions. The direct lenders’ willingness to underwrite deals absent an immediate path to public markets stands in contrast to banks that demand a clear runway to an IPO or bond sale to justify higher leverage.

Credit Conditions and Interest-Rate Environment

The Federal Reserve’s interest-rate decisions since late 2022 have further buoyed private credit activity. As policymakers signaled the likelihood of additional rate hikes, some banks began pulling back from riskier credits, preferring higher-rated, shorter-duration loans. Private credit funds, armed with locked-in pools of capital and accustomed to floating-rate structures tied to SOFR plus hefty spreads, moved to capture dislocated lending opportunities. When 10-year U.S. Treasury yields climbed toward 4.5 percent in May, private credit spreads—already padding borrower borrowing costs by 300 to 400 basis points—remained attractive to investors seeking floating-rate income.

Moody’s Ratings recently projected that private credit would continue to gain market share as higher-cost capital becomes more tolerable for corporations wanting to avoid refinancing risk. “In a rising-rate and volatile tariff landscape, the value of a committed facility outweighs the incremental spread,” says Marc Pinto, global head of private credit at Moody’s. “Borrowers are willing to pay for the certainty of capital, even if it comes at a premium.” As a result, direct-lending pipelines have swelled, and many managers expect to deploy more than $100 billion across U.S. mid-market deals by year’s end.

Regulatory and Risk Considerations

Despite its rapid ascent, private credit carries certain risks. Direct lenders typically hold onto loans rather than syndicate them broadly, which concentrates credit risk on their balance sheets or within a limited pool of institutional investors. In sectors exposed to tariffs—manufacturing, automotive supply chains, and commodity-linked industries—downturns could strain borrower cash flows, potentially leading to loan covenant defaults. Most private credit funds mitigate this risk through robust underwriting: they insist on higher initial equity contributions from sponsors, secure collateral positions in key assets, and negotiate tighter covenants during underwriting.

On the regulatory front, oversight is evolving. While private credit firms are not subject to the same bank capital rules, they must comply with investor-protection measures under the Investment Advisers Act and various state licensing requirements. In late 2024, new guidance on fair valuation and stress-testing for private funds prompted several managers to bolster their risk-management teams. As scrutiny intensifies, the industry anticipates further coordination between the Securities and Exchange Commission (SEC) and banking regulators to ensure systemic stability—particularly if private credit continues to assume a larger share of leveraged lending.

Looking Ahead: Persisting Tariff Uncertainty and Private Credit’s Role

With the July 9 date for potential EU tariffs looming and talks with China remaining fraught, companies expect continued uncertainty in global trade. Economists argue that even temporary presidential proclamations on tariffs can ripple through supply chains for months, driving raw-material costs higher and squeezing corporate margins. In this environment, private credit’s ability to guarantee committed funding without relying on a broad investor syndicate will likely keep the sector in high demand through the second half of 2025.

Industry executives anticipate that private credit will sustain at least a 20 percent market share of leveraged loans in the years ahead, up from roughly 15 percent in 2022. As large banks scale back their risk appetites for cyclical sectors—especially those exposed to trade policy—nonbank lenders could cement their status as the financing backstop during geopolitical shocks. For borrowers, the trade-off remains clear: accept slightly higher all-in interest costs in exchange for the certainty of capital and covenant flexibility.

Ultimately, while the private credit boom was already underway pre-2025—driven by regulatory reforms in the post-2008 era—tariff turmoil has accelerated its rise. Corporations looking to navigate uneven global demand and supply-chain disruptions find comfort in lenders whose capital is locked up through fund commitments, rather than at the mercy of shifting market sentiment. In the words of Blackstone’s Brad Marshall, “Private markets thrive on certainty amidst volatility. For companies facing a maze of trade risks, that certainty can make all the difference in executing strategic initiatives.” As trade headlines continue to unsettle public markets, private credit is poised to remain a preferred financing channel for those seeking refuge from tariff-driven storms.

(Adapted from Reuters.com)