Citigroup is paying $285 million to resolve civil scam charges from the SEC. The SEC whispered that Citigroup misinformed investors when it requested them to invest in a product based on United States mortgage debt.
It whispered that Citigroup didn’t notify investors that it was having a bet on the value of the investment lessening or that it had selected the assets itself. Citigroup resolved without denying or admitting the charges.
Credit Suisse was also concerned with the transaction and has paid $2.5 million to resolve the case, also without denying or admitting the charges. The SEC whispered that Citigroup built a collateralized debt obligation, or CDO, made up of about $1 billion of housing loans in year 2007.
It claims that Citigroup sold the CDO to customers, but took a small position itself, having a bet that the cost of the assets may drop. "The securities regulations demand that investor’s get more care and candor than Citigroup offered to these CDO customers," whispered Robert Khuzami from the SEC.
Investors weren’t informed that Citigroup had determined to bet against them and had assisted select the assets that would decide who lost or won." The CDO evaded within months, leaving about fifteen investors facing losses whereas Citigroup made $160 million in fees and trading profits.