Citigroup Settles For $300 Million – Civil Fraud Complaint 

Citigroup settles a civil fraud complaint. It was alleged that Citigroup promoted an investment tied to the housing market where they did not tell their investors that they were betting that those same securities would fail. 

Securities and Exchange Commission says that Citgroup took $1 Billion of the investors’s money and combined it with other assets that failed in the mortgage meltdown. 

Citi traders bet against these securities and made money even though their investors would lose money. One of the traders had an email that was pulled up in the investigation that was saying that this deal was the best and biggest ‘short’ ever. 

Investigators say that the investors had no idea what Citi was doing and that they were being bet against. Another email from  a Citi trader said that this was the “worst investment ever”. Yet, they were making a ton of money off of it while the investors were losing all their money they had entrusted Citi with. 

More big banks are being scrutinized by the SEC.

Goldman Sachs is agreeing to pay out $550 Million to settle claims that they did not tell their clients that they were betting against some of the mortgage securities. 

JP Morgan Chase agreed to pay out $153.6 Million for the same kinds of accustations. 

Wall Street firms took risky morgages and put them into instruments that ended up imploding when the housing market went bust. 

The reason that Citigroup has to pay more out is because the SEC says that Citigroup was actively involved in marketing this to their investors knowing full well what they were hiding or covering up and that is called Fraud. Citi employees created the deals, they created the packages and the marketing materials and then actively marketed those to their investors and they made $160 Million betting against the security. 

Goldman Sach’s securities and packaging was done by an outside marketing company and outside hedge fund investor. 

Citi says they did make money on this particular event and security but lost a lot more money on other securities and other debt obligations that eventually took the company down in 2008. 


One Response to Citigroup Paying $300 Million- To Settle Civil Fraud Complaint

  1. Katerina, I appreciate how you and your team – the Wellington Short Sale Agents team have been like our industry watchdog. You always have something informative to share and these information have been very useful to other short sale agents like us. Thank you so much. This is a sad story though, knowing that Citigroup is one of the most prominent and supposedly credible financial institutions we have.

    Petra Norris
    Lakeland Fl Short Sale Agents

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