Citigroup will pay certain investors in previous bond and stock offerings $730 million in cash to resolve claims that the mega bank misrepresented financial risks from its exposure to mortgage-backed securities.
According to the plaintiff’s lawyers, BLB&G, the Citigroup Bond Litigation was filed on behalf of purchasers of 48 offerings of Citigroup preferred stock and bonds issued from 2006 through 2008. The case has been pending for four long years and is tied directly to the financial crisis—a time period when Citi investors allegedly discovered that the bank's exposures to the mortgage crisis were greater than anticipated.
The plaintiffs accused Citigroup (C) of conducting a series of public offerings prior to the collapse of the subprime mortgage market based on offering documents that contained material misrepresentations and omissions regarding Citigroup’s exposure to billions of dollars in mortgage related-assets, BLB&G said in a press statement.
The plaintiffs claimed Citigroup materially understated the loss reserves for its portfolio of high‐risk residential mortgage loans, and falsely stated that risky assets it held in off‐balance sheet entities were of high credit quality.