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People walk past a 1Malaysia Development Berhad billboard at the fund's flagship Tun Razak Exchange development in Kuala Lumpur on March 1, 2015.Olivia Harris/Reuters

Malaysia filed criminal charges on Friday against 17 current and former directors at subsidiaries of Goldman Sachs Group Inc. following an investigation into a multibillion-dollar corruption scandal that led to the demise of state fund 1Malaysia Development Berhad.

The United States bank has been under scrutiny for its role in helping to raise US$6.5-billion through bond offerings for 1MDB, the subject of corruption and money laundering investigations in at least six countries.

But Malaysian prosecutors have said US$2.7-billion of the proceeds were diverted and the offering statements filed with the regulators contained statements that were false, misleading or involved material omissions.

Friday’s charges were brought under a section of the Malaysian Capital Markets and Services Act that holds certain senior executives responsible for offences that may have been committed by the firm, attorney-general Tommy Thomas said.

“Custodial sentences and criminal fines will be sought against the accused ... given the severity of the scheme to defraud and fraudulent misappropriation of billions in bond proceeds,” Mr. Thomas said in a statement.

Goldman Sachs said the charges were misdirected.

“We believe the charges announced today, along with those against three Goldman Sachs entities announced in December last year, are misdirected and will be vigorously defended,” a Goldman Sachs spokesman in Hong Kong said.

“Under the Malaysian legal process, the firm and the individual entity directors were not afforded an opportunity to be heard prior to the filing of these charges, which do not affect our ability to conduct our current business globally.”

Those charged on Friday include Richard Gnodde, chief executive of Goldman Sachs International, Michael Evans, president of Alibaba Group Holding Ltd. and a former director at Goldman Sachs (Asia) LLC, and Michael Sherwood, former vice-chairman of Goldman Sachs Group.

An Alibaba spokeswoman said the company was aware of the charges against Mr. Evans and would continue to monitor the situation.

Each charge carries a maximum jail term of 10 years and a penalty of at least 1-million ringgit (US$239,000).

The charges say the Goldman Sachs units omitted material facts in the bond offerings, among them that Malaysian financier Low Taek Jho was the operator and key intermediary for 1MDB.

Mr. Low has been described by Malaysian and U.S. authorities as the central player in the 1MDB scandal. He has denied wrongdoing and his whereabouts are unknown.

Goldman Sachs on Friday said 1MDB provided written assurances to the bank for each transaction that no intermediaries were involved.

Last year, Malaysia filed criminal charges against three Goldman Sachs subsidiaries and two of the U.S. bank’s former employees in connection with 1MDB.

Goldman Sachs has consistently denied wrongdoing and said certain members of the former Malaysian government and 1MDB lied to Goldman Sachs, outside counsel and others about the use of transaction proceeds.

The U.S. Department of Justice is investigating the bank for its role as underwriter and arranger of the bond offer.

An estimated US$4.5-billion was misappropriated from 1MDB by fund officials and their associates between 2009 and 2014, according to the Justice Department.

Tim Leissner, a former partner of Goldman Sachs in Asia, pleaded guilty last August to conspiracy to launder money and conspiracy to violate the Foreign Corrupt Practices Act and agreed to forfeit US$43.7-million.

Malaysia has said it was seeking up to US$7.5-billion in reparations from Goldman over its dealings with 1MDB, set up in 2009 by then prime minister Najib Razak.

Mr. Najib, ousted in an election last year, is facing dozens of criminal charges related to 1MDB. He has pleaded not guilty and denied wrongdoing.

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