Citigroup agreed to pay a compensation of $590 million to settle a lawsuit with shareholders, who accused the bank of failing to disclose its full exposure to financial instruments backed by toxic mortgages before the financial crisis, reports the Financial Times. The settlement, which requires the approval of a judge, is one of the largest such payment ever made and comes two years after Citigroup reached an agreement with the U.S. Securities and Exchange Commission (SEC), for the same charges.
The settlement with the shareholders provides a modest compensation, as the market value of Citigroup decreased by over 90% in the last five years, and shows that the Wall Street huge bill over disputes related to the financial crisis continues to grow. This settlement is the result of a class action lawsuit filed on behalf of shareholders that bought Citigroup’s common stock between February 26, 2007 and April 18, 2008. The bank was accused of hiding its exposure to toxic assets.
Another example is the case of Abu Dhabi Investment Authority (Adia), which has invested $7.5 billion in Citigroup in late 2007, which is seeking compensation of up to $4 billion. In 2011, an arbitration panel has ruled in favor of Citigroup, but Adia has appealed the decision.
Despite the agreement with shareholders, Citigroup, the third-largest U.S. bank in terms of assets, continue to reject all accusations, stating that the amount for shareholders is covered from the reserves for litigation.
Citigroup is one of the banks most affected by lawsuits in the past few years. Two years ago, the bank paid $75 million to settle a lawsuit with the SEC, when the bank was accused of misleading investors about its exposure to subprime mortgages. The bank also expects approval for another $285 million settlement with SEC, related to allegations that it cheated investors regarding financial instruments backed by toxic assets.
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