The Securities and Exchange Commission lost its lawsuit against a former Citigroup (C) director alleged to have misled investors in a $1 billion collateralized debt obligation tied to risky mortgages.

A jury for the U.S. District Court in the Southern District of New York found Brian Stoker, ex-director of Citi's CDO structuring group not liable for the faulty financial deal.

The jury, on their own, made a statement to the court stating their verdict should not deter the SEC from further investigating financial misdeeds.

The SEC attempted to settle with Citi for $285 million after investors lost more than $700 million in the Class V III deal. U.S. District Court Judge Jed Rakoff rejected the settlement last year, claiming it "neither fair, nor reasonable, nor adequate."

Citigroup made $160 million in fees on the deal.

Rakoff said when he struck down the settlement that there was enough evidence to find Stoker liable for misleading investors.

According to emails reviewed by the SEC, one CDO trader under Stoker's management characterized the Class V III portfolio as "dogsh!t" and "possibly the best short EVER!" in an internal message.

"We agree with the jury's verdict, and hope to secure final judicial approval of our settlement with the SEC and put this matter behind us," a Citi spokeswoman said in a statement.

A spokesman for the SEC did not immediately reply to requests for comment.

jprior@housingwire.com

@JonAPrior