5 Things to Know About the U.S. Justice Department's 1MDB Case

U.S. officials are seeking the seizure of more than $1 billion of assets they believe were purchased using money misappropriated from 1Malaysia Development Bhd., or 1MDB, a Malaysian state investment fund. Here is what you need to know about the U.S. lawsuit.

#1: Core Findings

The asset seizure would be the largest ever by the U.S. Justice Department’s anticorruption unit. The civil complaint targets luxury real estate in Manhattan, Beverly Hills and London; fine art; a private jet and other assets allegedly purchased by confidants of Malaysian Prime Minister Najib Razak. The filings also describe how a senior figure called “Malaysian Official 1” allegedly received hundreds of millions of dollars in funds siphoned from 1MDB. A person with direct knowledge of the investigation said “Malaysian Official 1” is Mr. Najib.

#2: How Big Is the Scandal?

The U.S. complaint describes the case as an “international conspiracy to launder money” with as much as $3.5 billion misappropriated overall. Some investigators believe the sums could be even higher. Among the prize assets U.S. authorities are now seeking: a Vincent van Gogh pen-and-ink drawing from 1888, along with a pair of Claude Monet paintings, which were bought by a Najib associate. U.S. officials said they would have sought even more, but they believe some of the misappropriated money was spent on unrecoverable activities like gambling.

#3: What Is 1MDB and Why Does it Matter?

The fund was set up by Mr. Najib in 2009 to help stimulate the economy in Malaysia, a key U.S. ally in Asia and longtime favorite of international investors. The fund raised billions of dollars, which were supposed to help develop a new financial center in Kuala Lumpur along with other projects. But today the fund has little to show for its economic development programs and has struggled to pay down debts. The move to target assets linked to 1MDB sets up a rare confrontation between U.S. prosecutors and a country that is seen as an important partner in the fight against terrorism as well as a counterweight to China’s rising ambitions in Asia.

#4: How Has Malaysia Reacted?

Mr. Najib and 1MDB officials have denied wrongdoing, and pledged to cooperate with investigations. They have said the real problems with 1MDB have to do with too much debt and poor business plans. The Malaysian attorney general has cleared Mr. Najib of wrongdoing and said the funds that went into Mr. Najib’s account were a legal political donation from Saudi Arabia, and that most of the money was returned. Malaysian officials have also cracked down on critics while tightening controls on the media, portraying international reports on 1MDB as part of a smear campaign led by the country’s opposition.

#5: What Happens Now?

Malaysian opposition leaders have renewed their calls for Mr. Najib to resign in the wake of the latest allegations. But Mr. Najib continues to enjoy support in some parts of Malaysia. He has fought off past efforts to oust him from his office by rallying members of his party, which has run Malaysia since its founding, and pushing out officials who opposed him. Still, the latest allegations intensify the pressure on Mr. Najib. And cleaning up 1MDB’s debts could dent the country’s reputation in the eyes of investors.