Citigroup will pay $730m to settle a class-action lawsuit claiming investors were misled by the bank. The lawsuit involved investors who purchased the bank’s debt and preferred stock.
The purchases were made between May 11, 2006 and November 28, 2008. Citigroup has maintained its innocence throughout the suit and denied the allegations in a statement released late on Monday.
Citigroup added that it agreed to the $730 million settlement to avoid further expenses and uncertainties that can come from drawn out litigation. The New York-based bank explained:
“This settlement is another significant step toward resolving our exposure to claims arising from the financial crisis, and we look forward to putting this matter behind us.”
The settlement is the second for Citigroup, who announce a settlement in January with federal regulators pertaining to its foreclosure practices. Regulators alleged that the bank took part in industry-wide practices that caused illegal foreclosures. The bank took a fourth-quarter charge of $305 million to cover the settlement.
The recent settlement alleges that the bank misled buyers over its exposure to subprime mortgages and other high-risk securities. The class-action lawsuit is just one of many filed against Citigroup and other big US banks pertaining to the 2008 financial crisis. Citi suffered more in the aftermath than other banks, like JP Morgan Chase.
The law firm Bernstein Litowitz Berger & Grossman handled the most recent case. They argued that Citigroup also misrepresented its exposure to to mortgage-related assets. The law firm added, “It wasn’t until November 2008, when the bank received substantial government assistance, that investors learned the full truth about Citigroup’s financial condition.”
Another case involving Citigroup settled last August for $590 million. The bank also denied the allegations in that case and explained it was settling to avoid additional legal costs.
Do you think Citigroup’s payment of $730m is enough, or should the bank admit to the class-action lawsuit’s charges (if they are guilty)?