Two Citigroup Inc. associates will pay $179.5 million to determine federal regulators' charges of confusing investors in hedge funds that collapsed.
On Monday, the Securities and Exchange Commission publicly declared the resolution with Citigroup Alternative Investments, a branch of the bank, and Citigroup Global Markets, an associated organization. The sum they are remitting, $139.9 million plus interest amounting to $39.6 million, will be refunded to investors in two hedge funds run by the firms.
The two organizations neither denied nor admitted misconduct but did agree to abstain from future contravention of laws governing securities. The organizations also were reprimanded, bringing the likelihood of an unbendable sanction if the misdeeds are repeated.
According to the SEC, the organizations sold securities in two hedge funds between 2002 and 2007, raising close to $3 billion from mostly well-to-do investors and institutions. The agency says the finance managers wrongly told potential financiers they were low-risk and comparable to bonds.
The hedge funds cratered in 2008 during the global financial crunch, resulting in billions of dollars in losses.
According to the SEC, in talking to potential financiers, the finance managers failed to reveal the "very real risks" of the hedge funds. According to the agency, a number of the managers' oral statements to financiers conflicted with the exposés in finance marketing resources.
In a statement, SEC Enforcement Director Andrew Ceresney said the finance managers "falsely assured them they were making safe investments even when the funds were on the brink of disaster."
In a formal statement, New York-based Citigroup announced that it was delighted to have determined the matter. Citigroup has announced before that the principal legal representatives of New York and Massachusetts also have looked into the marketing and management of the funds.