Citigroup agreed to pay $13.5m to settle a lawsuit accusing the bank of deceiving investors into remaining in its Corporate Special Opportunities hedge fund, only to suffer big losses when the fund was liquidated in November 2008, court papers filed on Monday show
Reuters reports that the lawsuit accused Citigroup and its Citigroup Alternative Investments affiliate of misleading investors in a December 14, 2007 letter about the status of the fund's leveraged, $756m at the time original investment in a syndicated loan arranged for ProSiebenSat1 SE, a large German broadcaster.
Investors said Citigroup falsely told them in the letter that the quality of the fund's portfolio was 'fundamentally sound', but was forced six weeks later to suspend redemptions. They claimed to lose the bulk of their investments when the fund was liquidated, despite Citigroup's efforts to prop it up.
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