$700 million of investor money lost in Citigroup deal
The Securities and Exchange Commission (SEC) is pushing for a settlement with Citigroup for an amount that is less than half of the $700 million that investors in a housing-related investment reportedly lost.
The subject of the investment concerned a deal in which investors were allegedly led to believe that assets that created an investment instrument and were tied to subprime mortgages had been chosen by an independent group but were really controlled by the Citigroup subsidiary, Citigroup Global Markets.
According to David S. Hilzenrath of the Washington Post in “Investors lost $700M in Citigroup deal, Sec says,” Citigroup then bet that the investment would lose value, as it invariably did, resulting in profits of $160 million to the bank and losses of about $700 million to the investors.
The SEC has said it will accept the sum of $285 million, which includes the $160 million gained by the bank, interest of $30 million, and a penalty of $95 million. The SEC told U.S. District Court Judge Jed S. Rakoff that not all the losses sustained by the investors were the result of the bank’s misconduct.
Calls to reject the settlement as grossly inadequate were made by at least one advocacy group, Better Markets. In response to Judge Rakoff’s concern as to why intentional fraud was not alleged, SEC attorneys said that the evidence “did not clearly establish an intent to defraud” and pointed to a disclaimer made to the investors that warned them that Citigroup’s interests may be adverse to theirs.
Information in this post gathered in association with Clearwater criminal lawyers.
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