Citigroup

Securities News: Citigroup to Pay $12M Over Alleged Dark Pool Misrepresentations, SEC Issues Nearly $4M Whistleblower Award, Ex-Bankrate CEO Who Pleaded Guilty to Fraud Gets 10 Years in Prison

Published on: September 28, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Citigroup Must Pay Over $12M Over Dark Pool Allegations

To settle Securities and Exchange Commission that it misled users of a dark pool run by an affiliate, Citigroup Global Markets Inc. (CGMI) and the affiliate, Citi Order Routing and Execution (CORE), will pay $12M. The regulator contends that Citigroup (C) misled users when it told them that high-frequency traders were prohibited from trading in Citi Match, despite the fact that two of the dark pool’s most active users qualified as high-frequency traders. These traders had executed over $9B in orders.

Dark pools are private securities exchange that allows investors, usually big financial institutions, to make anonymous trades. Members of the investing public cannot trade in dark pools. High-frequency trading typically involves the use of supercomputers, usually by financial firms, to make trades within microseconds.

FINRA Orders Citigroup to Pay $11.5M, Including at Least $6M to Investors, Over Inaccurate Stock Research Ratings

Published on: December 29, 2017 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority is ordering Citigroup Global Markets Inc. (CGMI) to pay $11.5M in restitution and fines to resolve charges accusing the firm of displaying “inaccurate research ratings” on over 1800 stocks—that’s more than 38% of the stock that CGMI covers. According to the self-regulatory organization, the result of the inaccurate ratings was that a lot of customers ended up buying shares they wouldn’t have purchased otherwise if the right information had been provided.

Citigroup settled the case without denying or admitting to wrongdoing. The alleged inaccurate ratings would have been issued between 2011 and 2015.

According to the self-regulatory organization, CGMI showed the inaccurate ratings not just to retail customers, but also to its brokers and supervisors. These inaccuracies were caused by errors in the firm’s electronic ratings data feed that it provides to its clearing firm. As a result: the wrong rating was displayed for certain securities, ratings for securities that CGMI did not cover were provided, and/or the ratings for securities that the firm did rate were not displayed at all. The research ratings on CGMI’s actual research reports, to which brokers had access, were not impacted by these mistakes.

Securities Fraud Settlements: HSBC, Deutsche Bank, and Citi Settle Libor Class Action for $132M & RBS Settles Mortgage Bond Trading Case for $44M

Published on: October 31, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Royal Bank of Scotland Settles DOJ RMBS Fraud Probe for $44M
Royal Bank of Scotland Group Plc (RBS) has agreed to a non-prosecution deal with the US Justice Department to resolve a criminal probe accusing traders of defrauding residential mortgage-backed securities (RMBS) and collateralized loan obligation (CLO) customers. As part of the settlement, RBS will pay a $35M fine. It will also pay at least $9M to over 30 customers, including affiliates of Barclays (BARC), Goldman Sachs (GS), Bank of America (BAC), Citigroup (C) and Morgan Stanley (MS), as well as to the Soros Fund Management and Pacific Investment Management Co. RBS admitted to the misconduct.

The bank’s fraud involved mortgage-backed securities, asset-backed securities, and commercial mortgage-backed securities. The group that handled these securities for the bank is no longer in operation.

According to prosecutors, from ’08 to ’13, RBS lied about bond prices, charged unwarranted commissions, and hid the fraud, all the while enhancing its own profits and costing customers money. In a joint press release, the DOJ and the Special Inspector General for the Troubled Asset Relief Program said that the bank’s employees were encouraged to engage in the wrongful behavior, including misrepresenting material facts to customers, lying about the seller’s asking price to the buyer and lying about the buyer’s asking price to the seller, pocketing the difference between what the buyer paid and what the seller received, and misrepresenting that a non-existent third party was involved in the bond sales so that the bank could charge the extra, unwarranted commission. RBS is also accused of training its CLO and RMBS traders to engage in the fraudulent practices, lying to customers that suspected the fraud, and disregarding its employees who complained about the fraud.

Securities News: Citigroup Settles Libor Lawsuit for $130M, Apollo Global is Sued for Fraud, and Ex-MSD Capital Analyst is Sentenced After Insider Trading

Published on: August 10, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Citigroup to Pay Plaintiffs Suing Over Libor Rigging

Citigroup Inc. (C) will resolve a private US antitrust lawsuit alleging Libor manipulation by paying plaintiffs $130M. The litigation was brought by “over-the-counter” investors who engaged in direct transactions with banks that belonged to the panel that determines London Interbank Offered Rate.

As part of the proposed preliminary settlement, the bank will pay the money to a fund for future class members. It also will cooperate with the lawsuits brought against other banks also accused of involvement in Libor rigging. Despite settling the case, however, Citigroup is not admitting or denying any wrongdoing.

Securities News: Deutsche Bank, Citigroup, JPMorgan, and Interactive Brokers Are Fined for Market Access Violations & Halliburton Settles FCPA Charges for $29.2M

Published on: July 28, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Four Firms Are Ordered to Pay $4.75M for Market Access Rule Violations

The Financial Industry Regulatory Authority, CBOE Holdings company Bats, the New York Stock Exchange, NASDAQ, and their affiliated Exchanges have fined four financial firms $4.75M collectively for violating the Securities Exchange Act of 1934’s Rule 15c3-5, which is also known as the Market Access Rule. The fines are: $2.5M for Deutsche Bank (DB), $800K for J.P. Morgan (JPM), $1M for Citigroup (C), and $450K for Interactive Brokers (IBKR).

The firms have given market access to quite a number clients that engage in millions of trades daily. However, according to FINRA, Bats, NASDAQ, and NYSE, when doing so, they purportedly did not comply with at least one of the Market Access Rule’s provisions when they did not put in place certain risk management controls and procedures so that orders that were “erroneous or duplicative,” or went beyond certain kinds of thresholds, could be detected or prevented. The firms are also accused of not having systems in place for properly supervising customer trading so that “potentially volatile and manipulative activity” could be avoided.

Three Ex-Traders Who Worked for Barclays, JPMorgan, and Citigroup Plead Not Guilty to Forex Rigging Charges While BNP Paribas is Fined $246M

Published on: July 17, 2017 | by Shepherd Smith Edwards & Kantas, LLP

In the US, former London traders Rohan Ramchandani, Chris Ashton, and Richard Usher have pleaded not guilty to criminal charges accusing them of conspiring to manipulate prices in the foreign exchange market. Ashton previously worked at Barclays (BARC) as the bank’s global head of spot currency trading. Ramchandani used to be Citigroup’s (C) G-10 spot currency trading head. Usher served a similar role at JPMorgan & Chase (JPM).

Prosecutors are accusing them of conspiring with other traders in a Forex rigging scheme to share sensitive client information through an electronic chat room referred to as the “Cartel,” as well as via phone, in order to quash competitors.

The criminal charges are related to a global probe into currency market rigging. To date, seven banks have paid approximately $10B fines over this type of manipulation, including Citigroup, Barclays (BARC), JPMorgan, and Royal Bank of Scotland (RBS).

CFTC Cases: Non-Prosecutorial Deals Reached With Ex-Citigroup Traders Over Spoofing Allegations, NY-Based Firm is Barred From Commodity Interest Trading, and Regulator Alleges Fraud Involving Forex Trading of a Pooled Investment

Published on: June 30, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Former Citigroup Global Markets Traders Accused of Spoofing Arrive at Non-Prosecution Deals
The US Commodity Futures Trading Commission has reached non-prosecution agreements with three ex-Citigroup Global Markets Inc.(C) traders. Daniel Liao, Jeremy Lao, and Shlomo Salant admitted to engaging in spoofing in US treasury futures markets while working for the firm. The three of them also provided information about misconduct that was committed by others.

According to the non-prosecution deals, each trader submitted big orders on the opposite of orders that were smaller with the intention of cancelling the bigger orders. They engaged in spoofing to fill their smaller orders at prices they preferred.

The agreements with the ex-Citigroup traders comes nearly six months after the bank settled with the CFTC allegations over spoofing and supervisory-related deficiencies. A number of unlawful incidents at Citigroup were identified in the non-prosecutorial deals.

CFTC Cases: Ex-Citigroup Global Markets Traders Settle Spoofing Charges and Vision Financial Partners to Pay Over $6.5M in Off-Exchange Binary Options Fraud Case

Published on: March 31, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Former Citigroup Global Markets Traders to Pay Penalties for Spoofing

Ex-Citigroup Global Markets Inc. (C) traders Jonathan Brims and Stephen Gola have settled spoofing charges that the US Commodity Futures Trading Commission brought against them. According to the regulator, the two men engaged in spoofing while trading for the firm, and they must now pay $200K and $350K in civil monetary penalties, respectively. They also are temporarily “banned from trading in futures markets.” Goal and Brims won’t be allowed to resume trading in the futures markets until six months after they’ve paid their penalties in full.

According to their respective orders, the two men engaged in spoofing, which involves making a bid or offer with the intention to cancel the bid or offer prior to execution of the bid. They did this over 1,000 times in different Chicago Mercantile Exchange US Treasury futures products. They would make offers or bids of at least 1,000 lots even though they planned to cancel the orders before they actually occurred.

The orders were made after another small offer or bid was made on the other side of the same market “or a correlated futures or cash market.” The CFTC said that the two men initiated the orders in order set up or increase an already existing imbalance in the order book. They purportedly canceled the orders after the smaller orders were filed or if they determined that there was too high a risk that their orders might actually go through.

Oceanografía Sues Citigroup, Claims Alleged Multi-Million Dollar Fraud at Banamex

Published on: February 27, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Oceanografía, formerly the biggest oil and gas company in Latin America, is accusing Citigroup (C) of using it to detract from probes into the fraud involving Banamex, which is Citibank’s Mexican subsidiary. Oceanografía collapsed in 2014.

Citigroup is accused of granting a $585M credit line to Oceanografía so that the latter could get hundreds of millions of dollars in cash advances for work by Pemex, an oil company owned by Mexico. However in February 2014, Pemex notified Citigroup that about $400M in Oceanografía invoices, which were supposed to secure the cash advances, had been forged, possibly by a Banamex employee. Because of this, Citibank cancelled Oceanografía’s credit line and the oil and gas company collapsed.

Oceanografía maintains that it never forged the invoices nor did it have cause for such illegal action.

CFTC Orders Citigroup to Pay $25M for Spoofing, Supervisory Failures

Published on: February 13, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Citigroup Global Markets Inc. (C) has been ordered to pay $25M penalty by the U.S. Commodity Futures Trading Commission to settle charges alleging spoofing in US Treasury futures markets. The regulator is also accusing the firm of not doing a diligent enough job of supervising agents and employees that were involved with the spoofing orders, which purportedly took place between 7/16/2011 and 12/31/2012.

Spoofing

Spoofing involves a trader making an offer or bid but with the intention of calling off the bid or offer before it actually goes through. According to the CFTC’s order, through five traders, Citigroup took part in spoofing over 2500 times in different Chicago Mercantile Exchange (CME) U.S. Treasury futures products. The spoofing strategy purportedly applied involved making offers or bids of at least one thousand lots but with no intention of allowing them to be executed.