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Forum Post: "Citibank sold a package of toxic mortgage-backed securities to unsuspecting customers ..then shorted the same securities."

Posted 12 years ago on Oct. 31, 2011, 11:51 a.m. EST by jansberry (52)
This content is user submitted and not an official statement

It doesn’t get any more corrupt than this.




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[-] 2 points by MonetizingDiscontent (1257) 12 years ago

::::::::::::SEC Chided Again by Judge in Citigroup Fraud Case::::::::::::


-Thursday, 29 Dec 2011-

(Reuters) - The U.S. Securities and Exchange Commission got a fresh dressing-down from the judge who rejected its $285 million settlement with Citigroup Inc, as he said the regulator kept him out of the loop on its efforts to salvage the case.

In his latest sharply-worded order, U.S. District Judge Jed Rakoff chastised the SEC for not telling him it had filed an emergency request with an appeals court to put the case on hold, after making the same request to him.

So when Rakoff on Tuesday issued a ruling opposing any delay in the case, he was beaten to the punch; 78 seconds earlier, the 2nd U.S. Circuit Court of Appeals had granted the SEC the temporary halt it sought.

He also accused the SEC and Citigroup of potentially "misleading" the court, saying they called him around 3:30 p.m. EST (2030 GMT) on Tuesday to discuss the case, without mentioning the filing with the 2nd Circuit.

Less than an hour later, the 2nd Circuit ruled, and so did Rakoff. That 2nd Circuit order negated the work Rakoff said he had done over the weekend to get a ruling to the SEC as quickly as he could.

Rakoff wrote that he "spent the intervening Christmas holiday considering the parties' positions and drafting an opinion, so that (the court) could file it on December 27, i.e. the first business day after the Christmas holiday."

To prevent a recurrence, Rakoff ordered the SEC and Citigroup to "promptly notify" him of any filings they make in the appeals court.

An SEC spokeswoman had no immediate comment. A Citigroup spokeswoman declined to comment.

The $285 million settlement was intended to resolve charges that Citigroup sold risky mortgage-linked securities in 2007 without telling investors that it was betting against the debt, and causing more than $700 million of losses.

In rejecting the accord in November, Rakoff said the SEC's failure to require Citigroup to admit or deny its charges left him no way to know whether the settlement was fair. Rakoff also called the payout "pocket change" for the third-largest U.S. bank.

The 2nd Circuit case is SEC v Citigroup Global Markets Inc, 2nd U.S. Circuit Court of Appeals, No. 11-05227. The district court case is SEC v. Citigroup Global Markets Inc, U.S. District Court, Southern District of New York, No. 11-07387.

(Reporting By Aruna Viswanatha and Jonathan Stempel; Editing by Tim Dobbyn)

[-] 2 points by MonetizingDiscontent (1257) 12 years ago

:::::Did You Hear the One About the Bankers?:::::


(NYTimes) CITIGROUP is lucky that Muammar el-Qaddafi was killed when he was. The Libyan leader’s death diverted attention from a lethal article involving Citigroup that deserved more attention because it helps to explain why many average Americans have expressed support for the Occupy Wall Street movement. The news was that Citigroup had to pay a $285 million fine to settle a case in which, with one hand, Citibank sold a package of toxic mortgage-backed securities to unsuspecting customers — securities that it knew were likely to go bust — and, with the other hand, shorted the same securities — that is, bet millions of dollars that they would go bust.

It doesn’t get any more immoral than this. As the Securities and Exchange Commission civil complaint noted, in 2007, Citigroup exercised “significant influence” over choosing $500 million of the $1 billion worth of assets in the deal, and the global bank deliberately chose collateralized debt obligations, or C.D.O.’s, built from mortgage loans almost sure to fail. According to The Wall Street Journal, the S.E.C. complaint quoted one unnamed C.D.O. trader outside Citigroup as describing the portfolio as resembling something your dog leaves on your neighbor’s lawn. “The deal became largely worthless within months of its creation,” The Journal added. “As a result, about 15 hedge funds, investment managers and other firms that invested in the deal lost hundreds of millions of dollars, while Citigroup made $160 million in fees and trading profits.”

Continue Reading at:


[-] 1 points by hchc (3297) from Tampa, FL 12 years ago

And yet no one is in jail. The scam will repeat itself soon.

[-] 1 points by MonetizingDiscontent (1257) 12 years ago

::::::::::::Judge Blocks Citigroup Settlement With S.E.C.::::::::::::


-November 28, 2011-

WASHINGTON — A federal judge in New York on Monday threw out a settlement between the Securities and Exchange Commission... http://topics.nytimes.com/top/reference/timestopics/organizations/s/securities_and_exchange_commission/index.html?inline=nyt-org ...and Citigroup... http://topics.nytimes.com/top/news/business/companies/citigroup_inc/index.html?inline=nyt-org ...over a 2007 mortgage derivatives deal... http://topics.nytimes.com/top/reference/timestopics/subjects/d/derivatives/index.html?inline=nyt-classifier ...saying that the S.E.C.’s policy of settling cases by allowing a company to neither admit nor deny the agency’s allegations did not satisfy the law.

The judge, Jed S. Rakoff... http://topics.nytimes.com/topics/reference/timestopics/people/r/jed_rakoff/index.html?inline=nyt-per ...of United States District Court in Manhattan, ruled that the S.E.C.’s $285 million settlement... http://www.nytimes.com/2011/10/20/business/citigroup-to-pay-285-million-to-settle-sec-charges.html ...announced last month, is “neither fair, nor reasonable, nor adequate, nor in the public interest” because it does not provide the court with evidence on which to judge the settlement.

The ruling... http://www.nysd.uscourts.gov/cases/show.php?db=special&id=138 ...could throw the S.E.C.’s enforcement efforts into chaos, because a majority of the fraud cases and other actions that the agency brings against Wall Street firms are settled out of court, most often with a condition that the defendant does not admit that it violated the law while also promising not to deny it....

(((Continue Reading this article Here))) http://www.nytimes.com/2011/11/29/business/judge-rejects-sec-accord-with-citi.html?_r=1

[-] 1 points by Nevada1 (5843) 12 years ago

Good post.

[-] 1 points by armchairecon1 (169) 12 years ago

You title is redundant.

Selling = shorting

[-] 1 points by MonetizingDiscontent (1257) 12 years ago

::::::::Citi agrees to pay $285million after 'defrauding investors in a $1billion derivatives deal'::::::::


..Fined $285 Million ...for a $1 BILLION Fraud... (That's justice?)

[-] 1 points by MonetizingDiscontent (1257) 12 years ago

Judge Rakoff Is Back: Questions Fairness Of Citigroup's $285 Million CDO Settlement With The SEC


Jed Rakoff is well known to frequent readers of Zero Hedge: he is the judge who nearly brought down the SEC settlement with Bank of America over the whole bonus non-disclosure issue two years ago, and where Bank of America effectively acted under the duress of Hank Paulson and Ben Bernanke. Granted at the end of the day he sided with the status quo., but this may be his chance to redeem himself. Just out from Bloomberg:




To be sure, nobody dared to question the same wrist-slap settlement that JPM coerced the SEC into "enforcing" on it some months back, but Citi has always been far less connected. So are we about to witness yet another spectacle whereby the SEC's attempt to promptly brush yet another major CDO malfeasance under the rug is exposed for all to see? Or will this latest criminal action finally see the light of day and it will be far more difficult for Citi to neither "admit nor deny guilt"? Stay tuned.

[-] 1 points by MonetizingDiscontent (1257) 12 years ago

Good Post, IAmOWS963

VIDEO - Bill Black At Occupy Wall Street Discusses Putting Criminal Bankers In Jail


[-] 1 points by IAmOWS963 (7) 12 years ago

The book Wildfire:The Legislation that Ignited the Great Recession expands on this. Even names those within Citibank (back then CitiCorp) responsible for the financial explosion.