Citigroup out millions for mortgage fraud

Citigroup will pay $285 million in a settlement with buyers of a complex mortgage investment who filed fraud charges against the lender. The Securities and Exchange Commission reported that the bank misled buyers with inaccurate and inflated information regarding the investments, and bet against the transaction that resulted in $160 million in fees and profits. The investment went sour at the start of the housing market collapse.

The Associated Press reported this is one of many large settlements major U.S. financial institutions have paid out to disgruntled investors and homeowners over inaccurate mortgage data, including a $550 million settlement from Goldman Sachs and a $153.6 million pay out by JPMorgan Chase. The cases with the banks have involved complex investments known as collateralized debt obligations, which are securities backed by pools of assets such as mortgages.

According to the SEC, Citigroup will have to repay the fees and profits it earned from the toxic mortgages, as well as $30 million in interest and $95 million in penalties all to be returned to the investors.

“The securities laws demand that investors receive more care and candor than Citigroup provided to investors in the security," Robert Khuzami, director of the S.E.C.’s enforcement division, told The New York Times. “Investors were not informed that Citigroup had decided to bet against them and had helped to choose the assets that would determine who won or lost.”

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