Citigroup has agreed to pay nearly $300 million to settle a civil fraud complaint alleging that the banking giant promoted an investment tied to the housing market, yet failed to tell investors it was betting those securities would fail. The Securities and Exhchange Commission (SEC) claims that Citigroup packed the $1 billion investment with assets that buckled during the mortgage meltdown. Citi traders then bet against the security, or shorted it, eventually making money at the expense of its clients, the complaint says. One trader wrote in an email obtained as part of the SEC investigation that the Citi investments were possibly “the best short EVER!” Robert Kuzami, director of the SEC’s enforcement division, said that “Investors were not informed that Citigroup had decided to bet against them and had helped choose the assets that would determine who won or lost.” The settlement is the latest in a number of regulatory actions against banks for their role during the housing market collapse and ensuing financial crisis. The SEC has been investigating how Wall Street firms packaged risky mortgages into instruments such as collateralized debt obligations and other investments, which imploded when housing markets tumbled. Compared with Goldman Sachs, which agreed to pay $550 million to settle a mortgage-related securities case, the SEC said that Citi was more integrally involved in the alleged wrongdoing. Citi employees designed the security, marketed it to investors and made $160 million betting against it. In a statement, Citi acknowledged that it made money from the securities but claimed that it had lost money on other collateralized debt obligations, debts that nearly helped bring Citi down as the crisis reached its heights in 2008. The attorneys at Balkan & Patterson, LLP are experienced in class action litigation and will act to protect consumers against corporate wrongdoers. If you believe you have potential for a class action, please contact us immediately and we will review your case at no charge.
The law firm of Balkan & Patterson, LLP was founded in 2006 and is headquartered in Boca Raton, Florida, at 601 S. Federal Highway, Suite 302, with offices in Broward County. Mr. Balkan and Mr. Patterson can be contacted at (561) 750-9191. Additional information about Balkan & Patterson, LLP may be obtained from the firm’s website at www.balkanpatterson.com.