News and Articles

The Securities and Exchange Commission announced on August 17, 2015 that two Citigroup affiliates, Citigroup Global Markets, Inc. (CGMI) and Citigroup Alternative Investments LLC (CAI), agreed to bear all costs of distributing $180 million in settlement funds to harmed investors.
The Citigroup affiliates agreed to pay nearly $180 million to settle charges that they defrauded investors in two hedge funds by making false and misleading representations. The companies, through their financial advisors, misrepresented the funds by selling them as safe, low-risk, and suitable for traditional bond investors. The funds later crumbled and eventually collapsed during the financial crisis.
An SEC investigation found that the Citigroup affiliates made false and misleading representations to investors in the ASTA/MAT funds and the Falcon funds, which collectively raised nearly $3 billion in capital from approximately 4,000 investors before collapsing. Financial Advisors failed to disclose the very real risks of the funds. Many of the misleading representations made by Citigroup employees were in conflict with disclosures made in marketing documents and written materials provided to investors. Furthermore, CAI accepted nearly $110 million in additional investments and continued to assure investors that the funds were low risk, well capitalized investments with adequate liquidity, even as the funds began to collapse.
Andrew Ceresney, the Director of the SEC’s Enforcement Division said “Firms cannot insulate themselves from liability for their employees’ misrepresentations by invoking the fine print contained in written disclosures,” he added “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.”
CGMI and CAI consented to the SEC order without admitting or denying the findings.