Citigroup Inc. agreed to pay $13.5 million to settle a class action accusing the bank of misleading investors who bought into the bank’s Corporate Special Opportunities (CSO) fund. Citigroup was said to have failed to disclose risky debt that resulted in $400 million in losses. The settlement will have to survive a fairness hearing and obtain court approval. The settlement would dismiss with prejudice all related claims. Plaintiffs David Beach and Christopher Kelly alleged in their October 2012 complaint that Citigroup misled investors about “ill-fated trades” in the debt of German media company ProSieben, and by the time they withdrew their money, the investment had gone bad and it was too late.
The now-defunct hedge fund was liquidated in 2008 at 3 cents on the dollar, according to allegations made in the suit. The ProSieben investment violated “scaling” and concentration restrictions on investments that Citigroup said would govern the fund. It’s alleged that “investors were given no honest opportunity to assess their decision to remain in the investment.” For purposes of the settlement, the class is defined as persons or entities who acquired and class of shares in the Corporate Special Opportunities fund, excluding Citigroup and their affiliates.
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