NEW YORK: US banking giant Citigroup said it will pay $730m to settle a class-action suit by bondholders related to the 2008 financial crisis.
The suit alleged Citigroup misled buyers of its bonds over its exposure to subprime mortgages and other high-risk securities ahead of and during the crisis, from May 2006 to November 2008. The settlement is the latest step by Citi to put the ill-effects of the financial crisis behind it. Citi was harmed more by the crisis compared with some peers, such as JPMorgan Chase.
The plaintiffs had argued that Citigroup misrepresented its exposure to mortgage-related assets, according to Bernstein Litowitz Berger & Grossman, the plaintiffs attorneys.
Citi also understated the loss reserves for its mortgage loans and “falsely stated” that assets held off its balance sheet were of high value, Bernstein Litowitz said. “It wasn’t until November 2008, when the bank received substantial government assistance, that investors learned the full truth about Citigroup’s financial condition,” the law firm said.
In a statement, Citi denied the allegations, but said it was settling the case “solely to eliminate the uncertainties, burden and expense of further protracted litigation.”
Citi called the settlement, which must be approved by the US district court, “another significant step toward resolving our exposure to claims arising from the financial crisis.”
“We look forward to putting this matter behind us,” the bank said. AFP
