Articles Posted in Citigroup

The state of Virginia has arrived at a $63M settlement with 11 banks to resolve claims that they bilked the state’s retirement system by purportedly misrepresenting the quality of residential mortgage-backed securities in the run up to the 2008 financial crisis. The resolution settles all claims against the financial firms accused of causing financial harm to the Virginia Retirement system and its taxpayers and pensioners.

The banks involved will pay the following amounts respectively to settle, including:

· UBS Securities for $850K
· Bank of America’s Merrill Lynch, Pierce, Fenner & Smith, Inc. and Countrywide Securities Corp. (BAC) for $19.5M
· Credit Suisse Securities (CS) for $1.2M
· RBS Securities (RBS) for $10M
· HSBC Securities (HSBC) For $2.5M
· Barclays Capital (BARC) for $9M
· Goldman Sachs & Co. (GS) for $2.9M
· Morgan Stanley & Co. (MS) for $6.9M
· Citigroup Global Markets (C) for $4.8M
· Deutsche Bank Securities (DB) for $5.6M

The state lost $383M over RMBS it purchased from 2004 to before 2010 and it had to sell most of these securities, which were toxic and constructed on junk mortgages. The settlement is the largest non-healthcare related financial recovery in a case involving Virginia Fraud Against Taxpayers Act-related violations. However, according to the state’s Attorney General Mark Herring, even though the firm is settling it is not denying or admitting liability.

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Performer Ne-Yo Files Countersuit Against Citibank Over Alleged $5.4M Securities Fraud
Singer Ne-Yo is suing Citibank (C), claiming that the financial institution should have had the proper safeguards and procedures in place that could have prevented his ex-money manager Kevin Foster from allegedly bilking him of $4.5M. The performer had filed a securities case against Foster and the latter’s employer, V. Brown & Co., in 2014.

Ne-Yo sought $8M. $4.5M of which Foster had purportedly swindled by moving funds out of the singer’s accounts to the money manager’s own accounts and the accounts of others. Ne-Yo sought $3.5M for service payments he says that he paid Foster and V. Brown between ’05 and ’13.

The performer claims that Foster forged his name on loan documents and took the money, including $1.4M from Citibank that the singer claims he never signed off on. Right before Ne-Yo sued his ex-manager, however, Citi filed its own lawsuit against him for the loan.

Now, Ne-Yo is saying that Citibank never told him of the numerous transactions made by Kevin, some of which involved his overdrawn account at the bank.

Sec Issues Over $700K Award to Whistleblower
The Securities and Exchange Commission is issuing an over $700K award to an individual who blew the whistle on a company. The information that the person provided led to a successful enforcement action. The whistleblower, an industry expert, was not employed at the company. This is the first time a company outsider has been issued this type of award since the SEC opened its whistleblower office in 2011.

Because the regulator protects the confidentiality of whistleblowers, the individual’s identity has not been revealed. SEC Enforcement Division Director Andrew Ceresney said that the agency values voluntary submissions by industry experts with ‘first-hand” information of wrongdoing committed by company insiders.”

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In the U.K., a panel for the Court of Appeal refused to overturn the criminal conviction of ex-UBS (UBS) and Citigroup (C) trader. Tom Hayes is behind bars for conspiring to rig Libor. However, while his conviction will stand, the panel did lower his criminal sentence from 14 years to 11 years, citing his non-managerial role at the two banks and his diagnosis of mild Asperger’s.

Hayes is considered the main leader, spurring dozens of traders to manipulate the London interbank offered rate. However, his lawyers claim that Hayes did not hide his conduct from others at the bank and never considered his actions dishonest. Hayes said that his behavior was common in his industry.

When he voluntarily testified before prosecutors, Hayes admitted to manipulating rates. He also testified against a number of ex-friends and colleagues. Hayes also is facing criminal charges in the U.S.

Libor helps shape the borrowing costs for trillions of dollars in loans. Banks set rates, including Libor, by turning in rates at which they would be willing to lend each other money in different currencies and at different maturities.

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Millennium Global Emerging Credit Fund Ltd. is suing Citigroup (C). The hedge fund’s liquidators claim that the bank undervalued assets when it closed out certain trades during the financial crisis in 2008. They believe that Citigroup did this at rates that failed to reflect the true market value. Millennium sustained nearly $1 billion in losses. Now its liquidators want $53 million in damages.

The positions at issue were linked to the debt of Uganda, Sri Lanka, a brewer from the Dominican Republic. and a sugar company in Zambia. Citibank says the positions were illiquid and difficult to value even when the market was good. While the bank has admitted that it improperly valued certain trades, it maintains that the adjustments are not as great as what the hedge fund is claiming.

Millennium Global Emerging Credit Fund maintains that Citigroup did not use procedures that were “commercially reasonable” when it shut down the positions. The bank offered to pay Millennium about $6.8 million after more than fifty open transactions were closed out, but the fund believes that amount is way too low.

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Twelve years after Allied Irish Banks Plc (AIB) filed a securities lawsuit against Citigroup (C) accusing the bank of helping a rogue trader conceal about $691 million in losses, the case is slated to go to trial next month. AIB reportedly wants $872M from the New York-based bank— $372M in damages and about $500M in pre-judgment interest.

It was in 2003 that AIB sued Citigroup subsidiary Citibank and Bank of America Corp. (BAC). AIB contends that the defendants were linked to a scam that led to significant losses for its former unit, Allfirst Financial. Bank of America has already settled the allegations against it.

In 2002, trader John Rusnak’s losses were discovered and he pleaded guilty to banking fraud. Rusnak admitted to concealing $691M in trading losses while employed at Allfirst. The losses were sustained over five years and came from primarily trading the Japanese yen and for taking even bigger risks as he sought to get back some of these losses.

While Rusnak did not make a direct profit from the losses, he made over $650K in bonuses when he made it appear as if Allfirst was making money. He was released from prison in 2009.

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$1.87B securities settlement has been reached with 12 major banks. The case resolves investor claims that the financial firms conspired to rig prices to hold back competition in the credit default market. For now, the resolution is an agreement in principal and the parties have two weeks to work out the details before turning the deal over to U.S. District Judge Denise Cote in Manhattan for preliminary approval.

The defendants in this credit default case are:

· Bank of America Corp. (BAC)

· UBS AG (UBS)

· Goldman Sachs Group Inc., (GS)

· Barclays (BARC)

· Royal Bank of Scotland Group Plc (RBS)

· BNP Paribas SA (BNP)

· Morgan Stanley (MS)

· Citigroup (C)

· JPMorgan Chase (JPM)

· Credit Suisse Group AG (CS)

· Deutsche Bank AG (DB)

· HSBC Holdings Plc (HSBC)

Markit Ltd and the International Swaps and Derivatives Association are also defendants.

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The 11th U.S. Circuit Court of Appeals said that a lower court made a mistake when it threw out the city of Miami’s claims accusing Bank of America Corp. (BAC), Wells Fargo & Co. (WFC ), and Citigroup Inc. (C) of engaging in predatory mortgage lending to Hispanic and black borrowers. The Florida city brought its claims under the Fair Housing Act.

Miami claims that the three banks directed non-Caucasian borrowers toward more expensive loans that were frequently not affordable to them even if their credit was good. The city said that because of this “reverse redlining,” there were a lot of foreclosures, a rise in spending to fight blight, and lower property tax collections.

A U.S. district court judge threw out Miami’s mortgage fraud lawsuits last year. Judge William Dimitrouleas claimed that the city did not have the standing to sue and the harm alleged was too remote from the conduct of the banks.

The 11th circuit, however, said that standard was too strict. It believes that the banks could have foreseen that there would be attendant harm from such alleged discriminatory practices.
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The Federal Deposit Insurance Corp. is suing Bank of New York Mellon Corp. (BK), Citigroup (C), and US Bancorp (USB) for residential mortgage-backed securities that were purchased by the former Guaranty Bank.

The Texas-based bank closed shop in 2009 and the FDIC, which is its receiver, arranged for its deposits to be taken on by BBVA Compass, a U.S. unit of Spanish institution Banco Bilbao Vizcaya Argentaria SA (BBVA.MC). The regulator estimated that the shutdown would cost its deposit insurance fund $3 billion.

The 12 mortgage-backed trusts involved in this RMBS lawsuit were issued by Countrywide Home Loans and Bear Stearns Cos’ (BSC) EMC Mortgage Corp unit. In 2008, JPMorgan Chase & Co. (JPM.N) purchased Bear Stearns while Bank of America Corp. (BAC) purchased Countrywide.

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The Securities and Exchange Commission said that Citigroup Global Markets (C) will pay a $15M penalty to settle charges that it did not enforce procedures and policies that would stop and identify securities transactions potentially involving the wrongful use of material, nonpublic information. Citigroup agreed to the SEC’s order without denying or admitting to the regulator’s findings.

The firm also has paid $2.5 million to advisory client accounts that were affected. That amount is how much Citigroup made from the principal transactions that resulted because of the purported compliance and surveillance failures.

According to SEC, which conducted a probe, over a period of ten years, Citigroup failed to review thousands of trades that were made by a number of trading desks. Even though firm personnel looked at reports to assess trades daily, technological errors caused several information sources regarding thousands of key trades to be left out.

As the SEC noted in its order, advanced computer systems are often now involved in automated trading. Technology oversight is key to making sure that compliance is in effect.

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Citigroup Global Markets Inc. (CGMI) and Citigroup Alternative Investments LLC (CAI) have consented to pay close to $180M to resolve Securities and Exchange Commission charges accusing them of bilking about 4,000 investors in the Falcon fund and the ASTA/MAT fund. The two hedge funds went on to fail during the financial crisis. The settlement money will go to investors who were hurt in the purported fraud.

According to an SEC probe, the Citigroup (C) affiliates made misleading and false misrepresentations to investors. The two hedge funds, managed by Citigroup Alternative Investments, were highly leveraged and sold only to advisory clients of Smith Barney and Citigroup Private Bank. They were sold by financial advisers associated with Citigroup Global Markets. Together, the hedge funds raised close to $3 billion in capital from investors before they went on to fail.

In its order, the SEC said that the ASTA/MAT fund bought municipal bonds and hedged interest rates by employing a Treasury or LIBOR swap. It described the Falcon fund as multi-strategy, invested in fixed-income strategies (including collateralized loan obligations, collateralized debt obligations, asset-backed securities) as well as in the other hedge fund.

Investors claim that the two affiliates misrepresented the hedge funds as low-risk, safe, and suitable for bond investors looking for traditional investments, when, in fact, the funds were high risk. They contend that even as the funds started failing, CAI accepted close to $110 million in investments.

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