Dallas, Texas 05/014/2014 (FINANCIALSTRENDS) –Citigroup Inc (NYSE:C) reported on 9th May that it has not been successful in getting the appeals court to reject a lawsuit related to allegations of its misrepresentation and underplaying of risk involved in securities it was selling to investors during the run up to the financial crisis in 2008. The case papers reveal that the allegations stem from charges of miss selling of nearly one billion securities to gullible institutional investors.
The law suit appeal was brought in front of the court of New York Appeals by Loreley Financing, in which the institutional investor consortium has alleged that Citigroup Inc (NYSE:C) had fraudulently sold close to one billion worth security bonds that it had underwritten over the years in the run up to 2008 financial crisis.
The court panel which studies the law suit for its legal soundness, has gone ahead and upheld the lower court’s judgement, in which the judge has turned down Citigroup Inc (NYSE:C) request to dismiss the court case. The appeals panel on the other hand ruled that the appellant is barred from suing the bank for “unjust enrichment.”
Loreley Financing which is a consortium of nine private investment firms has been quoted to have submitted in the court papers that “The bank secretly chose the riskiest mortgages for sale in CDOs while buying credit default swaps to bet against them”. It goes on to claim that, “Citigroup used a similar scheme to help clients offload the risks of toxic mortgage-backed securities.”
It is of importance here to note that Citigroup Inc (NYSE:C) has been dragged in front of the courts along with a host of other big banking institutions like Goldman Sachs to defend themselves against similar allegations. In fact just last month, Citigroup Inc (NYSE:C) which is the third largest bank in U.S in terms of assets had settled out of court for a $1.13 billion settlement in order to make similar mortgage bond related allegations go away.