Two former oil company executives have been convicted by a Swiss court for their roles in embezzling more than $1.8 billion from Malaysia's state investment fund 1MDB, in one of the largest fraud cases in recent history.

The Swiss Federal Criminal Court in Bellinzona found Tarek Obaid, former chief executive officer of Geneva-based PetroSaudi, and his colleague Patrick Mahony guilty of fraud, criminal mismanagement and money laundering. Obaid, a Swiss-Saudi national, was sentenced to seven years in prison, while Swiss-British Mahony received a six-year sentence.

The court ordered the pair to pay back more than $1.75 billion to 1MDB, which has been at the centre of an international corruption scandal since allegations first surfaced in 2015.

Prosecutors alleged that Obaid and Mahony, along with fugitive Malaysian financier Jho Low, deceived 1MDB's board into believing PetroSaudi was backed by the Saudi Arabian government. This false claim led to 1MDB signing up to a joint venture with PetroSaudi in 2009.

"The accused deceived the members of the 1MDB board of directors into believing that Petrosaudi had links with the Saudi Arabian government and that PetroSaudi would contribute significant oil assets to the joint venture," the court stated. "These statements were false, and the accused knew this very well."

The court took into account "the very high amounts involved, the intensity of the criminal activity, [and] the selfish motive" when determining the sentences.

Prosecutors said the executives used the embezzled funds to purchase real estate in Switzerland and London, jewellery, and private equity investments. They also maintained "a lavish lifestyle", including spending on private jets and luxury yachts.

Daniel Zappelli, Obaid's lawyer, said his client "has always contested the commission of any offence" and would appeal the verdict. Mahony's legal representative did not respond to requests for comment.

The 1MDB board welcomed the court's decision, stating: "We welcome today's verdict.... which means that Patrick Mahony and Tarek Obaid will face justice for their role in embezzling and defrauding the people of Malaysia."

This case is part of a broader scandal involving 1MDB, which has implicated high-profile figures including former Malaysian prime minister Najib Razak, who is currently serving a prison sentence for his involvement.

The US Department of Justice has described the 1MDB affair as the world's largest kleptocracy case, with an estimated $4.5 billion siphoned from the fund since its inception in 2009.

Swiss prosecutor Alice de Chambrier called it the "scam of the century", describing Obaid and Mahony as "calculative, manipulative and obscenely greedy".

The convictions represent a significant victory for Swiss authorities, who are keen to demonstrate that Switzerland is not lenient on white-collar crime. The case follows the 2022 criminal conviction of Credit Suisse in a separate matter.

As the legal proceedings continue, Jho Low, the alleged mastermind behind the 1MDB fraud, remains at large.

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