On August 17, 2015, the SEC announced that two Citigroup affiliates agreed to bear the costs of distributing $180 million in settlement funds to harmed investors. In an investigation, the SEC found evidence that CGMI and Citigroup Alternative Investments LLC (CAI) defrauded investors in the ASTA/MAT fund and the Falcon fund by claiming they were safe, low-risk and suitable for traditional bond investors. The Citigroup affiliates were found to have made false and misleading representations to investors in the two hedge funds that were not in line with the disclosures made in marketing documents and written materials provided to such investors. Even as the funds began to collapse as a result of the financial crisis, the Citigroup affiliates did not accurately and plainly disclose the deteriorating condition of the funds.
Both CGMI and CAI consented to the SEC order, agreed to be censured and must cease and desist from committing future violations of Sections 17(a)(2) and (3) of the Securities Act of 1933, Section 206(2) of the Investment Advisers Act of 1940 (in the case of CGMI) and Section 206(4) of the Advisers Act and Rules 206(4)-7 and 206(4)-8 (in the case of CAI).
The press release is available at: http://www.sec.gov/news/pressrelease/2015-168.html.
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