Citigroup to face fraud charges, subject of SEC probe
Yesterday, New York Attorney General Andrew Cuomo announced that his office intends to file fraud charges against Citigroup. The charges surround Citigroup’s alleged fraudulent marketing and sale of auction-rate securities to investors.
Auction-rate securities are long term bonds sold at weekly or monthly auctions, often issued by municipalities or corporations. Citigroup is accused of marketing these long-term bonds as cash equivalents and selling them to everyday investors.
The market for auction-rate securities was very liquid prior to the credit crunch. But, the crunch left investors stuck with illiquid, long-term bonds instead of a safe, liquid alternative to cash.
Citigroup’s auction-rate securities sales are also the subject of a formal probe initiated by the SEC to determine if the company violated federal laws.
The four largest investment banks making a market in auction-rate securities are Citigroup, UBS, Morgan Stanley and Merrill Lynch. Any takers on which one is next to face charges?
Just kidding, but it’s too late anyway. UBS is facing a civil suit from state regulators in Massachusetts and Merrill Lynch was charged with fraud by the same state earlier this week.
Tags: auction rate securities, citigroup, fraud, merrill lynch, morgan stanley, sec, UBSRelated Stories
POSTED IN: Corporate, Investment, Market, News, Uncategorized
2 opinions for Citigroup to face fraud charges, subject of SEC probe
Donna
Aug 3, 2008 at 8:10 am
Hi Tisa this is stunning news indeed. citi and merrill were always the big boys who never fell foul.
Do you twitter want to follow you on that.
Doing startups this week on http://www.wisequeen.com
Citigroup’s $7 billion settlement
Aug 7, 2008 at 1:45 pm
[...] Citigroup has reached a multi-billion dollar settlement with state and federal regulators stemming from accusations of fraud in the sale of auction rate securities. The accusations were made public last week by New York Attorney General Andrew Cuomo. (See my 8/2 post on how the story began here) [...]
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