Two Citigroup affiliates pay out to settle the fraud case

Two associates of Citigroup have agreed to pay around $180 million to settle charges of mislead investors that will be paid in two hedge funds. The associate affiliates of Citigroup have forced investors to invest, even though the funds were classified as possessing significant risk to capital.

The funds, that were marketed since 2002, have later disintegrated and collapsed during the stock market stumble. Though the fund was failing, the managers accepted about $110 million in supplementary investments from new investors and pursued to recommend the funds as safe, low-risk investments.

The SEC’s Monday announcement read that the settlement with Citigroup Alternative Investments, a subordinate of the bank, and Citigroup Global Markets, an associated company. The amount being paid by them, $139.9 million plus $39.6 million in interest, will be returned to the mislead investors in two hedge funds managed by the firms.

“Advisers at these Citigroup associated companies, were assumed to look for welfare of the investors, but falsely ascertained them that they were in safe zone even when the funds were on the verge of disaster,” director of the SEC’s enforcement division, Andrew Ceresney, said in the statement.

The two associate firms neither confessed nor disagree the wrongdoing but did agree to keep away from future violations of securities laws. The firms also were disapproved, bringing the chance of a strict penalty if the alleged violation is repeated.

“We are happy to have solved this issue,” Citigroup spokesman Danielle Romero-Apsilos said in a statement by an email.

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