Citigroup pays $180 million to settle hedge fund fraud case

August 17, 2015
2 Comments

NEW YORK – U.S. securities regulators ordered two Citigroup affiliates Monday to pay $180 million to settle charges that they defrauded investors by falsely claiming a pair of hedge funds were low-risk.

Citigroup collected nearly $3 billion from 4,000 investors by claiming the ASTA/MAT fund and the Falcon fund were low-risk investments akin to investing in government bonds, the U.S. Securities and Exchange Commission said.

In 2008, both funds collapsed during the financial crisis.

“The funds were not bond substitutes, and an investment in the funds carried significantly greater risk than a bond investment,” the SEC said.

Both funds used “significant amounts of leverage” and were classified in an internal Citigroup rating system as having “significant risk to principal.”

“That rating, however, was not shared with the majority of investors and financial advisors,” the SEC said.

The SEC criticized Citigroup for poorly overseeing fund management staff to ensure communications were “accurate and not misleading.”

The order also faulted fund employees for dishonest statements about the funds’ financial condition when they came under strain in 2007.

“Advisers at these Citigroup affiliates were supposed to be looking out for investors’ best interests, but falsely assured them they were making safe investments even when the funds were on the brink of disaster,” said Andrew Ceresney, director for the SEC’s enforcement division.

Citigroup said through a spokesman that the bank is “pleased to have resolved this matter.”

You may be interested

Pregnant sloth rescued after falling from a tree
Sloth watch
675 views
Sloth watch
675 views

Pregnant sloth rescued after falling from a tree

The Tico Times - October 20, 2017

Vet tech Larissa Calis of the nonprofit Kids Saving the Rainforest in Manuel Antonio, on Costa Rica's Central Pacific coast, wrote…

New country club launches reforestation program
Santa Ana
494 views
Santa Ana
494 views

New country club launches reforestation program

The Tico Times - October 20, 2017

Those who live in the hustle and bustle of Costa Rica's cities may associate reforestation and biological connectivity with the…

A reader’s glimpse of Monteverde recovery
Photos & Video
6608 views
Photos & Video
6608 views

A reader’s glimpse of Monteverde recovery

Katherine Stanley - October 19, 2017

Tico Times reader Margaret Burton wrote to us from the United States to share this photo taken by her brother-in-law Michael…