MUMBAIMUMBAI (Reuters Breakingviews) - Goldman Sachs may wind up paying twice for 1MDB. Abu Dhabi’s sovereign fund is suing the U.S. investment bank in New York for its role in the Malaysian fund scandal. The damages sought could exceed Goldman’s average annual net profit over three years of $5.4 billion. The longer the fight drags out, the worse the fallout looks. 

Aggrieved investors smell blood after former Goldman partner Tim Leissner pleaded guilty to conspiring to launder money and other charges filed by U.S. authorities. New revelations in the New York Times that then-Chief Executive Lloyd Blankfein met privately with Jho Low, the alleged mastermind of the scandal, alongside an Abu Dhabi fund executive will weaken any defence that this was the work of rogue employees.  

Abu Dhabi’s lawsuit comes on top of growing expectations of a hefty settlement with the U.S. Department of Justice. Goldman could pay a fine of up to $1.2 billion plus return $600 million in fees and revenue the bank made arranging three 1MDB bonds, reckons a Morgan Stanley banks analyst. Two of those bonds were jointly guaranteed by International Petroleum Investment Company, which has now been folded into Mubadala, another Abu Dhabi fund. 

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The round-robin of accusations is growing. Prime Minister Mahathir Mohamad’s new administration in Malaysia wants back fees it paid Goldman, and is also trying to wriggle out of a separate settlement with Abu Dhabi it says is worth about $5.8 billion. Under that London consent award, 1MDB and Malaysia agreed to take responsibility for the principal and interest of the $3.5 billion IPIC-guaranteed bonds.

Goldman is now caught in the middle as neither Abu Dhabi nor Malaysia wants to be left holding the embarrassing liabilities due in 2022. It’s not clear how well Abu Dhabi’s claim will hold up given it is also accusing others in the same lawsuit, including two of IPIC’s own former top employees allegedly bribed by Goldman. The bank says it expects to vigorously contest the charges.

The emirate also has tried and failed to take on Wall Street before. The Abu Dhabi Investment Authority lost its case against Citigroup over its $7.5 billion crisis-era investment in the then-struggling mega-bank. The global stink around 1MDB, though, could yet put multiple squeezes on Goldman.