Citigroup has agreed to pay $285 million to settle charges for misleading investors about a $1 billion collateralised debt obligation (CDO), the US Securities and Exchange Commission said on Wednesday.
Under the settlement, Citigroup was required to pay $160 million in disgorgement plus $30 million in pre-judgement interest and a $95-million penalty for a total of $285 million that would be returned to investors, the SEC said.
The SEC alleged that Citigroup Global Markets structured and marketed a CDO, which was tied to the US housing market in which Citigroup bet against investors as the housing market showed signs of distress, Xinhua reported.
The CDO defaulted within months, leaving investors with losses while Citigroup made $160 million in fees and trading profits.
"Investors were not informed that Citigroup had decided to bet against them and had helped choose the assets that would determine who won or lost," said Robert Khuzami, director of the SEC division of enforcement.
The settlement also required remedial action by Citigroup in its review and approval of offerings of certain mortgage-related securities, the SEC added.