Malaysia's Jho Low, IPIC subsidiary in deal to buy energy firm.

Money misappropriated from a Malaysian state fund was used to partly finance the $2.2 billion acquisition of Houston-based Coastal Energy in 2014, the U.S. government alleged in a lawsuit filed last week.

Proceeds from the Coastal Energy deal were then used to buy a property in London's glitzy Mayfair district, according to the lawsuit dated June 7. The United States is seeking to seize the London property, along with two others, the document showed.

The lawsuit was filed as part of a U.S. Justice Department effort to seize about $1 billion worth of assets linked to funds it says were siphoned from 1Malaysia Development Berhad (1MDB), a Malaysian state fund under investigation in at least six countries for money-laundering.

The justice department filed civil lawsuits last July alleging that about $3.5 billion had been misappropriated from 1MDB and used instead to buy assets, including luxury property and artwork in the U.S. and abroad.

The latest lawsuit shows that Malaysian financier Low Taek Jho, a central figure in the scandal, allegedly used 1MDB money to fund the Coastal Energy acquisition.

Jho Low, as he is known, partnered with Compañía Española de Petróleos SAU (Cepsa) to buy Coastal Energy for a total purchase price of $2.2 billion. Cepsa is the Spanish unit of Abu Dhabi's state investor, International Petroleum Investment Company.

Goldman Sachs acted as financial advisor to Cepsa in the acquisition, according to a news release announcing the deal in November 2013.

600 PERCENT RETURN

Low invested about $50 million in the acquisition through a company called Strategic Resources (Global) Ltd, with Cespa funding the remainder of the $2.2 billion, according to the lawsuit.

Shortly afterward, Cepsa transferred $350 million to Low's Strategic Resources, buying Strategic Resources' stake in the joint venture used to buy Coastal Energy, the lawsuit says.

"The commercial basis for this nearly immediate 600 percent return on investment is not immediately apparent," the Justice Department said.

Low's contribution was traceable to misappropriated proceeds of a $3 billion bond raised by Goldman for 1MDB in 2013, the lawsuit says.

Goldman helped 1MDB, which was founded by Malaysian Prime Minister Najib Razak in 2009, raise $6.5 billion in three bond sales in 2012 and 2013 to invest in energy projects and real estate to boost the Malaysian economy.

Goldman was not immediately available for comment.

The Wall Street Journal first reported on Tuesday the allegations in the latest lawsuit.

Goldman told the Journal that prior to the U.S. lawsuit it was not aware, nor was it involved in, any transaction in which Strategic Resources sold its stake in a joint venture back to Cepsa.

Jho Low, whose whereabouts are uncertain, could not be reached for comment. He has denied any wrongdoing in the past.

IPIC, Cepsa and 1MDB did not respond to requests for comment.

LONDON PROPERTIES

Proceeds from the Coastal Energy deal were used by Low to buy the Stratton Office in London for 42 million pounds ($53.15 million), according to the June 7 lawsuit.

The justice department lawsuit says two other Mayfair properties -- a penthouse and a flat -- were also bought with misappropriated 1MDB funds.

Low paid 35 million pounds ($44.29 million) in 2010 for the penthouse and the flat, part of a building known as Stratton House.

The funds for those purchases were transferred from an account belonging to a company called Good Star. Low was the sole owner and beneficiary of Seycehlles-registered Good Star, a Reuters examination found.

U.S. prosecutors have said more than $700 million of misappropriated funds from 1MDB flowed into the accounts of "Malaysian Official 1", who U.S. and Malaysian officials have identified as Najib.

Najib has denied any wrongdoing and was cleared of any wrongdoing by Malaysia's attorney general.

By Rozanna Latiff and Nathan Layne