Citigroup to Pay $180 M to Settle Hedge Fund Fraud Charges

Two Citigroup affiliates agreed to pay $180 million to settle fraud charges related to a pair of hedge funds that raised nearly $3 billion before collapsing during the financial crisis.

citigroupCitigroup’s long and sordid history with hedge funds ended Monday when it agreed to pay $180 million to end a Securities and Exchange Commission probe into two hedge funds that blew up during the financial crisis.
The big bank, led by CEO Michael Corbat, agreed to settle charges that it defrauded investors in the two highly leveraged hedge funds by claiming the funds were safe, low-risk, and suitable for traditional bond investors — “even when they were on the brink of disaster,” the SEC said.
In the settlement, Citi neither admitted nor denied the allegation.
ASTA/MAT, a municipal bond fund, and Falcon, which also invested in collateral debt obligations (CDOs) and collateralized loan obligations (CLOs) — the toxic securities banks created during the credit bubble — raised $3 billion from 4,000 investors before collapsing, the SEC said.
Citi agreed to distribute the money to investors.
Citi exited hedge funds by mid-2013 due in part to prohibitions in the Dodd-Frank banking reform legislation.

(Visited 68 times, 1 visits today)