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Former Malaysia prime minister arrested in 1MDB probe

Former Malaysian Prime Minister Najib Razak is at the center of investigations looking into the Malaysian state investment fund known as 1MDB and whether it was used for embezzlement or money laundering.

Former Malaysian leader Najib Razak was arrested in connection with an investigation into scandal-hit state fund 1MDB and was expected to be charged on Wednesday in Kuala Lumpur, according to the task force investigating the case.

Mr. Najib was taken into custody on Tuesday at his residence in Langgak Duta in Kuala Lumpur, the task force said. He'll be detained overnight at the headquarters of the Malaysian Anti-Corruption Commission, according to an official. The arrest was made in connection with SRC International Sdn., a company linked to 1Malaysia Development Bhd.

Mr. Najib's spokesman did not immediately respond to calls. He has previously denied wrongdoing in relation to 1MDB.

Prime Minister Mahathir Mohamad, who took power two months ago, has revived a probe into the state investment company set up under Mr. Najib's watch. His government has sought to recoup $4.5 billion of funds that were potentially lost through 1MDB, as well as fees paid to Goldman Sachs Group (GS). A parliamentary committee in 2016 identified at least $4.2 billion in irregular transactions by the fund.

Malaysia's police last week disclosed about 1.1 billion ringgit ($273 million) of items that included Hermes International handbags, Rolex watches and cash in raids linked to Mr. Najib.

KPMG, the state fund's auditor, retracted audit reports for financial years ended March 2010, 2011 and 2012, as it didn't have access to relevant documents that Malaysia's new government has since declassified, 1MDB said in a statement on June 26. The accounting firm told 1MDB not to rely on its reports for those three years as they don't show "true and fair" assessment for finances.

SRC International was set up by 1MDB in January 2011 using a 15 million ringgit government grant, out of the approved 20 million ringgit, according to an executive summary of a declassified report by the auditor general. SRC received a 2 billion ringgit loan from state pension fund Kumpulan Wang Persaraan (Diperbadankan) in August of that year, which carried a state guarantee of 2.9 billion ringgit to cover the interest.