U.S. District Judge Denise Cote gave final approval recently to a $1.86 billion settlement in a case that alleged Citigroup Inc. and others conspired to keep new participants from entering the credit default swaps market (the instruments in question are used as a hedge against the possibility of borrower default), keeping the price for trading in the swaps artificially high and costing potential class members tens of billions of dollars.
Though no class members objected to the fees and costs, several complained that the settlement’s distribution plan is unfair and inadequate, that it disproportionately awards damages to certain types of trades, and that it uses flawed definitions, among other allegations. More than 1,300 class members will get payments of more than $100,000 each and more than 230 will receive over $1 million apiece. The judge disagreed with the objectors, determining:
The allocation formula has a reasonable, rational basis, was recommended by experienced and competent class counsel and does not provide impermissibly favorable treatment to any segment of the settlement class.
The settlement covers anyone who bought credit default swaps from or sold them to the Defendants or any alleged co-conspirator in any transaction covered by the settlement between Jan. 1, 2008, and Sept. 25, 2015, and was litigated largely by hedge funds, pension funds, university endowments, small banks, and other investors who sued as a group – around 13,000 investors.
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