Cit­i­group in $13.5m set­tle­ment over de­funct CSO hedge fund

The Pak Banker - - COMPANIES/BOSS -

Cit­i­group Inc (C.N) agreed to pay $13.5 mil­lion to set­tle a law­suit ac­cus­ing the bank of de­ceiv­ing in­vestors into re­main­ing in its Cor­po­rate Spe­cial Op­por­tu­ni­ties hedge fund, only to suf­fer big losses when the fund was liq­ui­dated in Novem­ber 2008.

The law­suit ac­cused Cit­i­group and its Cit­i­group Al­ter­na­tive In­vest­ments af­fil­i­ate of mis­lead­ing in­vestors in a Dec. 14, 2007 let­ter about the sta­tus of the fund's lever­aged, 558 mil­lion euro ($756 mil­lion at the time) orig­i­nal in­vest­ment in a syn­di­cated loan ar­ranged for ProSiebenSat1 SE (PSMGn.DE), a large Ger­man broad­caster.

In­vestors said Cit­i­group falsely told them in the let­ter that the qual­ity of the fund's port­fo­lio was "fun­da­men­tally sound," but was forced six weeks later to sus­pend re­demp­tions. They claimed to lose the bulk of their in­vest­ments when the fund was liq­ui­dated, de­spite Cit­i­group's ef­forts to prop it up. The pre­lim­i­nary set­tle­ment was filed in Man­hat­tan fed­eral court and re­quires court ap­proval. Cit­i­group de­nied wrong­do­ing in agree­ing to set­tle. A spokes­woman, Danielle Romero-Ap­si­los, said the New York-based bank is pleased to re­solve the mat­ter.

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