On August 17, Citigroup agreed to pay $180 million to settle charges from the SEC that two of the megabank’s hedge funds defrauded investors. According to the SEC, Citigroup’s hedge funds “made false and misleading representations to investors” about how risky investing in the funds were.
Citigroup continually assured investors the funds were safe and even solicited new investment as collapse was imminent. The funds then went bust.
The hedge fund settlement is just one of many paid by Citigroup in recent years due to criminal conduct at the Too Big To Fail/Jail bank. Since its formation in 1998 in correspondence with the repeal of the Glass-Steagall Act, Citigroup has almost perpetually faced charges of misconduct.
Though HSBC made recent headlines for laundering drug money, one of Citigroup’s first major legal issues was dealing with charges that the bank helped launder money for corrupt Mexican officials who received payoffs from drug traffickers. Citigroup also admitted misconduct in laundering money for off shore shell banks in the Caribbean.
Credit card improprieties are also a chronic problem for Citigroup. As recently as this summer, Citigroup paid $700 million for defrauding their credit card customers. In 2000, Citigroup paid $45 million for charging questionable fees to customers.
Citigroup later played a key role in two of the biggest corporate fraud scandals of the early 2000s — Enron and Worldcom. Citigroup paid $2 billion to Enron investors to settle a lawsuit from investors that the firm assisted Enron in defrauding them. Citigroup also paid $2.5 billion to settle a lawsuit from Worldcom investors that the firm assisted Worldcom in defrauding them.
But where Citigroup really distinguished itself was its role in causing the 2008 financial crisis — a crisis that is estimated to have cost the US economy $20 trillion.
Citigroup agreed to pay $7 billion to settle charges with the Department of Justice for defrauding investors with “securities containing toxic mortgages.” Citigroup spread the contagion of fraudulent residential mortgage-backed securities (RMBS) that infected the global financial system and led directly to the crash. That’s right, it was Citigroup and its Wall Street partners that caused the financial crisis, not poor people who bought homes they could not afford.
Some observers prefer people not use the term “banksters,” but given Citigroup’s history and current behavior it seems a good fit.