Protesters hold posters depicting financier Jho Low as a pirate during an anti-corruption rally in Kuala Lumpur last year. (AP File Photo)

Malaysian investigators have uncovered details of how fugitive financier Jho Low could have made financial gains from the entity that predated the scandal-plagued state fund 1MDB, through a bond sale involving local bankers and a Thai securities brokerage.

Authorities are investigating a 5-billion-ringgit (US$1.2 billion) bond sale in 2009 by Terengganu Investment Authority, or TIA, a sovereign wealth fund that later became 1MDB, according to people familiar with the matter.

The name of Bangkok-based Country Group Securities Plc has emerged for the first time in connection with the long-running saga of 1Malaysia Development Bhd and its predecessor.

Investigators believe that $126 million in illicit funds — which Low and his associate Eric Tan have been charged with receiving — came from the deal arranged by AMMB Holdings Bhd, known as AmBank, and involving Country Group and a Singapore-based entity linked to Low and Tan, said one of the people, asking not to be named.

The investigation is focused on tracing money flows that led to Low, as well as officers at TIA and AmBank, who may have abetted Low in the dealings. Authorities are looking into whether any individuals concealed or misrepresented statements related to the bond sale and whether any of the funds were misappropriated.

Low, who remains at large, has been named by US prosecutors as the alleged mastermind of a $4.3-billion scheme to siphon money from 1MDB — putting him at the centre of a massive scandal that has ensnared the US investment bank Goldman Sachs and spawned investigations on three continents. Low, whose full name is Low Taek Jho, has repeatedly denied wrongdoing, and said he held no formal position at 1MDB.

Malaysian authorities are looking into whether Low and Tan benefited from a complex series of transactions that involved bonds issued by TIA changing hands twice in the same day at vastly different prices, the sources said.

The Securities Commission is conducting inquiries into matters relating to 1MDB, including the TIA bond issuance, a spokesperson said in response to a Bloomberg query. The regulator has the authority to enforce securities rules on institutions or individuals if there is any wrongdoing.

Representatives for AmBank, Jho Low and the Malaysian Anti-Corruption Commission could not immediately comment on the matter. Previous efforts to reach Tan were unsuccessful.

A spokesman for the police declined to comment. They are working on a tight timeline to get to the bottom of the sprawling 1MDB scandal, with Inspector-General Mohamad Fuzi Harun setting a March deadline to complete investigation papers on the fund, the state news agency Bernama reported on Thursday.

The transactions in 2009 may have started with TIA engaging AmBank to help it raise 5 billion ringgit, the sources said. AmBank then sold 3.8 billion ringgit of the TIA notes to Country Group Securities in Thailand, and 700 million to a Singapore-based company, while buying 500 million for itself. The three parties bought the notes at a discounted price of about 87 ringgit for 100, as they were the first 30-year Islamic notes ever issued by Malaysia.

Investigators got suspicious when documents they obtained showed that the parties resold the bonds for a profit on the same day. AmBank helped them sell the notes for 100 to 105 ringgit to local investors, according to the sources.

Low served as an adviser to TIA at the time and was involved in the discussions on the bond issuance from the start, the people said.

That the transactions were done within 24 hours has raised many questions for investigators, who want to know why AmBank didn’t arrange for the bonds to be sold directly to the investors, and how Country Group — a new name in the 1MDB investigations — came into the picture. It’s unclear if any new charges will be filed related to the transactions.

Veeraphat Phetcharakupt, CEO of Country Group, could not immediately comment. Thailand’s Securities and Exchange Commission hasn’t been contacted about any investigation involving 1MDB, said Secretary-General Rapee Sucharitakul.

As for how the money may have got to Low, investigators uncovered a put option agreement that Country Group signed with Singapore-based ACME Time Ltd, whose beneficiaries are Low and Tan. That agreement paved the way for Country Group to send a third-party transfer instruction to AmBank to pay $113 million of the windfall, generated by reselling the TIA notes, to ACME Time, one of the people said.

Malaysian prosecutors have levelled multiple charges against Low and Tan in their absence, including allegations of receiving $113.4 million of illicit funds through ACME Time from an AmBank account in May 2009, followed by another $12.6 million in July 2009, according to charge sheets issued in December. The charge sheets didn’t specifically link the illicit payments to the TIA bond sale.

Former Malaysian prime minister Najib Razak, who has pleaded not guilty to dozens of charges linked to 1MDB, has said that Low never worked for or represented 1MDB, and instead Low was a representative of “Arab parties”. Low said he was never employed by the governments of Malaysia or Abu Dhabi.