Malaysia turned up the heat on Goldman Sachs Group Inc. (GS.N), filing the first criminal charges against the U.S. bank in relation to the 1MDB scandal.

Authorities alleged that Goldman misled investors when the bank knew that proceeds from 1MDB bond sales it arranged would be misappropriated. The government is seeking fines well in excess of both the US$2.7 billion of allegedly misused funds and the US$600 million in fees received by Goldman on the deals. Goldman has blamed rogue employees for any wrongdoing in relation to 1MDB.

“Their fraud goes to the heart of our capital markets,” Malaysian Attorney General Tommy Thomas said in a statement in announcing the charges on Monday. “If no criminal proceedings are instituted against the accused, their undermining of our financial system and market integrity will go unpunished.”

Goldman Sachs’s role raising about US$6.5 billion for 1MDB in 2012 and 2013 has evolved into its thorniest scandal since the global financial crisis a decade ago triggered a public backlash against banks. Former Goldman partner Tim Leissner has pleaded guilty to U.S. bribery charges and his former deputy, Roger Ng, was arrested in Malaysia. It put a third Asian executive on leave.

Along with targeting the firm, Malaysia filed related charges against Leissner and Ng, as well as former 1MDB employee Jasmine Loo Ai Swan and fugitive financier Low Taek Jho.

Goldman Sachs will “vigorously defend” against the charges, spokesman Edward Naylor said in an email. “We believe these charges are misdirected,” he said, adding that the bank continues to cooperate with all authorities investigating the matter.

The indictment focus on circulars and memoranda that Goldman prepared for the 1MDB bonds, saying that they contained statements that were false or misleading or both. Malaysia is pursuing the claim on the basis that the relevant bond documents were sent to the regulator in its offshore banking haven in Labuan, and therefore were covered by its securities law, Thomas said in the statement.

Malaysia is filing the charges against three of the bank’s units — Goldman Sachs International (U.K.), Goldman Sachs (Singapore) and Goldman Sachs (Asia) LLC — The Edge newspaper reported, citing charge sheets from the Kuala Lumpur court.

“The criminal charges of this nature are grave, and it goes to the core of Goldman’s business as an investment bank,” said Nizam Ismail, a partner at RHTLaw Taylor Wessing LLP in Singapore. “If the outcome of the case results in a criminal conviction against the bank, there are potentially severe reputational and financial risks to the bank, as well as the bank’s standing as a licensed financial institution with regulators worldwide.”

Officials in Malaysia had previously said they were seeking a full refund from Goldman Sachs for the fees it received for the 1MDB bond sales. The $600 million Goldman earned from the bond issues dwarfed what banks typically make from government deals.

Malaysian financier Low Taek Jho, the alleged mastermind of the schemes to siphon billions of dollars from 1MDB, was also charged in absentia in the U.S. He was accused of conspiring with Ng, then a Goldman Sachs banker, to launder billions of dollars embezzled from 1MDB, known formally as 1Malaysia Development Bhd.

The U.S. Federal Reserve, meanwhile, is ramping up an investigation into how executives dodged the bank’s internal controls while helping Malaysian authorities raise the money, people briefed on the matter said last month. The probe examines the actions of Goldman Sachs as well as individuals and has been gaining momentum, the people said, asking not to be identified because the inquiry is confidential.

And two Abu Dhabi funds, International Petroleum Investment Co. and Aabar Investments have sued Goldman Sachs in a civil suit in New York, seeking damages for alleged fraud in connection with embezzlement at 1MDB.