The US Federal Reserve has cautioned Goldman Sachs Group Inc that their reputation could be at risk over the deals they had helped put together for troubled Malaysian state fund 1MDB, reported The Wall Street Journal ( WSJ ) today.

"Those deals are increasingly under a brighter spotlight, as additional details emerge about the alleged actions of the firm's former Southeast Asia head who handled transactions for the fund 1MDB," WSJ said.

Goldman Sachs’ partner Tim Leissner was suspended and later quit early this year after it was discovered that he had allegedly written an unauthorised reference letter on behalf of controversial businessman Jho Low, who has been closely linked to 1MDB, WSJ reported people familiar to the matter saying.

"When it disclosed Mr Leissner’s suspension, Goldman didn’t name Mr Low.

"The fact that Mr Leissner wrote a letter of reference to another financial institution for someone involved in 1MDB puts the firm deeper into the controversy surrounding the fund, lawyers say.

"People familiar with the matter said Mr Leissner’s letter had included details on Mr Low’s finances, while overstating the extent to which Goldman had done due diligence on him," read WSJ 's report.

Leissner, who is cooperating with investigators, has not been accused of wrongdoing in the 1MDB deals.

However, WSJ noted that he did not respond to requests for comment about the letter and his involvement with Low.

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Probing if Goldman misled investors

Meanwhile, Goldman Sachs is withholding unvested stock worth millions of dollars from Leissner going back several years, until it completes its internal probes into his dealings with 1MDB and Low, said people familiar with the matter.

Goldman Sachs and Leissner have also been negotiating over his compensation since he resigned.

Goldman Sachs had advised 1MDB on three acquisitions and arranged the sale of three bonds valued at a total of US$6.5 billion, which earned them US$650 million.

"Leissner, who was among the bankers working on the deals in 2012 and 2013, helped counsel 1MDB from its inception," WSJ said.

1MDB is being investigated in at least six countries, including Malaysia, US and Switzerland.

"US investigators are trying to determine whether Goldman misled investors who bought the 1MDB bonds, a person familiar with the matter said.

" The Wall Street Journal has previously reported that Goldman was part of a broad probe by the Federal Bureau of Investigation (FBI) and the Justice Department.

"The investigation remains in its early stages, and neither Goldman nor 1MDB has been accused of wrongdoing," WSJ said.

The Federal Reserve, Goldman Sach's main US regulator began scrutinising the bond deals in early 2014, questioning why 1MDB had continued to sell bonds despite holding ample cash, people familiar with the matter said.

"Fed officials were also critical of Goldman's vetting of the 1MDB deals, noting they had posed reputational risk.

"Fed officials have continued to monitor Goldman’s role in the Malaysia scandal, the people said," WSJ said.

A Federal Reserve spokesperson has also declined to comment, they added.