By Rozanna Latiff

KUALA LUMPUR The Malaysian government on Thursday denied allegations by Goldman Sachs that it had breached a settlement deal over the U.S. bank's role in the multi-billion dollar 1MDB corruption scandal, after the firm sued Malaysia in a British court.

Goldman Sachs in 2020 had agreed to pay $3.9 billion to settle Malaysia's criminal probe over its role in the multi-billion dollar 1MDB corruption scandal.

But the parties are now in disagreement over the settlement, which stipulates that Goldman should make an interim payment if Malaysia did not recover at least $500 million from the firm by August 2022.

Malaysia's Attorney General Chambers said in a statement that the allegation of breaches mischaracterises the conduct of the government and it would prepare its response, adding that "the interest of the Malaysian people is paramount."

Earlier, Malaysia's 1MDB task force said Goldman Sachs' move to sue in a London arbitration court was "premature".

"At this juncture... parties are still considered to be in the amicable good faith discussions stage and therefore as an aggrieved party, the 1MDB Taskforce views Goldman Sachs’ initiation of arbitration proceedings as premature and without due consideration of necessary prerequisites," 1MDB task force chairman Johari Abdul Ghani said in a statement.

The bank had requested several extensions to a deadline for discussions to settle the dispute, with the latest deadline coming up on Nov. 8, he said.

Johari accused Goldman of trying to distract from the interim payment, and said the Malaysian government would respond to the matter accordingly.

Goldman Sachs lodged its suit less than two months after Malaysian Prime Minister Anwar Ibrahim threatened to take the company to court.

Malaysian and U.S. authorities estimate some $4.5 billion were stolen from 1MDB between 2009 and 2014, in a globe-spanning scheme that implicated high-level government and banking officials in Malaysia and elsewhere.

Goldman had helped 1MDB raise $6.5 billion in two bond offerings, earning itself $600 million in fees, according to the U.S. Justice Department.

(Reporting by Rozanna Latiff; Editing by Martin Petty & Simon Cameron-Moore)