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November 05, 2011

Citigroup Fined $285 Million Over Mortgage Securities
Citigroup this week agreed to pay $285 million to settle claims that it misled investors when it sold them securities consisting of bad mortgages right around the time the housing market was collapsing. The Securities and Exchange Commission said that the bank had made $160 million betting against the investments in 2007 while investors lost millions. In agreeing to the settlement, Citi neither admitted to or denied any wrongdoing, simply saying in a statement that it was glad to put the matter behind it.

The settlement is the largest penalty paid by a Wall Street firm for misleading investors since Goldman Sachs agreed to a $550 million settlement last year. JP Morgan Chase accepted a deal over similar charges in June, paying a penalty of $153.6 million. All of these penalties involve the sale of complex investments called collateralized debt obligations, which are security bundles backed by pools of mortgage loans and other debt-related assets.

Citigroup's settlement includes 100 percent of the profit it earned over the securities in question, plus $30 million in interest and a $95 million fine. The SEC said that the money will be returned to investors defrauded by the scheme. The bank posted profits of $3.8 billion in the most recent quarter, but needed a government bailout of $45 billion to stave off bankruptcy at the height of the financial collapse.

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