The emirate's sovereign wealth fund and scandal-engulfed 1MDB have reportedly resolved their differences over a $6.5 billion claim. 

The billion-dollar graft scandal surrounding Malaysian state fund 1MDB and a complicated web of offshore vehicles reaches as far as Abu Dhabi. The emirate has reportedly jailed two former executives with ties to Switzerland's Falcon Private Bank.

The oil-rich state isn't part of a U.S.-led judicial probe over suspected corruption at 1MDB, but it is locked in a $6.5 billion private quarrel with the fund over a series of soured bond deals and repayments. 

That dispute has now privately been buried, «The Strait Times» reported. 

Settlement Reached

A settlement between Malaysia and Abu Dhabi could be signed as soon as Friday, the newspaper reported, citing «senior financial executives» familiar with the talks.

The London-based arbitration negotiations had foundered for months, with even China reportedly summoned to help mediate the dispute.

It centers around a $1 billion loan by Abu Dhabi to 1MDB and coupon payments on another $3.5 billion in debt. Abu Dhabi claimed 1MDB defaulted on the loan, while the fund defaulted on two bonds that Abu Dhabi had guaranteed.

Abu Dhabi contests how much it received back from 1MDB, which involves a British Virgin Islands entity that has a very similar name to an Abu Dhabi subsidiary.

Respite for Najib?

A settlement means a brief respite for Malaysian Prime Minister Najib Razak, who has sought to put daylight between himself and the scandal.

To be sure, investigators are still pursuing the matter with vigor: a private jet belonging to alleged mastermind Jho Low was impounded in Singapore and he lost a New York luxury hotel, as his family fought to hang on to other luxury assets. 

As the international investigation into the billion-dollar graft scandal rumbles on, the Malaysian fund itself is remarkably calm – and the country's political opposition faces an uphill battle to change that. 

Malaysia is expected to call elections as soon as this year, meaning the issue will continue to dog Najib. 

The issue is only slightly less dicey for highly-secretive Abu Dhabi, which has been mum as the global probe unfolds. The two countries have maintained strong diplomatic relations, and state-run Abu Dhabi firms have invested copiously in Malaysia.