Two funds affiliated with Citigroup will pay out $180 million to investors for misrepresenting their financial health in the lead-up to the financial crisis, under a settlement reached with the Securities and Exchange Commission.
“Advisers at these Citigroup affiliates were supposed to be looking out for investors’ best interests, but falsely assured them they were making safe investments even when the funds were on the brink of disaster,” Andrew Ceresney, director of the SEC’s Enforcement Division, said in a statement on the settlement announced Monday.
A spokesman for Citigroup responded that the company is “pleased to have resolved this matter.”
Citigroup’s affiliates will pay out $180 million to the investors hurt by the failure of the hedge funds, but without admitting guilt for breaking specific securities laws.
The SEC’s settlement accuses the two funds, Citigroup Global Markets Inc., and Citigroup Alternative Investments, of saying they were safe for bond investors throughout 2002-2008.
Even as the funds fell apart and eventually collapsed during the financial crisis, according to the SEC, its managers continued to advertise it as a low-risk, well-capitalized investment.
One manager with oversight of the funds and who knew of their problems starting in 2007 continued to be directly involved in marketing and communicating with investors, the SEC said. The SEC blamed the firm for failing to rein in the unnamed manager.
