Malaysia on Monday set up a task force to probe allegations that billions of dollars were looted from sovereign wealth fund 1MDB in an audacious fraud overseen by ousted leader Najib Razak.

Mahathir Mohamad, the new prime minister led a reformist alliance to a shock victory at the May 9 polls over Najib's coalition, which had governed Malaysia uninterrupted for over six decades.

A major reason for the success of 92-year-old Mr Mahathir was public disgust at allegations of endemic corruption among the country's ruling elite, and in particular an explosive scandal surrounding state fund 1MDB.

The fund, 1Malaysia Development Berhad, was set up in 2009 ostensibly to promote the development of the Malaysian economy.

But it is alleged that Najib, his family and cronies looted the investment vehicle in a massive fraud stretching from the Cayman Islands to New York, with stolen funds used to buy everything from real estate to artworks.