This week federal judge Jed S. Rakoff rejected a $285 million settlment between Citigroup and the SEC. The rejected settlement concerned Citigroup’s selling of toxic mortgage securities to investors back in 2007. Allegedly, Citigroup knew these were bad investments so they bet against their own customers resulting in $160 million in profit for Citigroup and $700 million in losses for investors.
Judge Rakoff seemed particularly irked that the SEC’s settlement agreement did not require Citigroup to admit any guilt or wrongdoing regarding this matter.
Or perhaps the judge was just angry upon realizing he had zero use for the weather balloon he was going to receive with all his Citi “Thank You Points”.
The New York Times reports that the Citigroup fraud settlement deal with the SEC may be in trouble. Federal Judge Jed S. Rackoff is questioning the Securities and Exchange Commission as to why the proposed settlement with Citigroup for its alleged role in the selling of junk mortgage securities is so light.
While the $285 million that Citigroup would pay may seem like a lot, it is really little more than pocket change for them and, perhaps most importantly, Citigroup would not have to admit any wrongdoing.
The SEC will get it’s chance to respond to Judge Rackoff’s concerns at a hearing next month.
My guess is that the they will probably ratchet up the penalty by asking Citigroup to also give every Citi credit card holder ten extra Thank You Points. Harsh…