(Reuters) - Citigroup Inc will pay $285 million to settle charges that it defrauded investors who bought toxic housing-related debt that the bank bet would fail, the U.S. Securities and Exchange Commission said on Wednesday.
The SEC said the bank's Citigroup Global Markets unit misled investors about a $1 billion collateralized debt obligation by failing to reveal it had "significant influence" over the selection of $500 million of underlying assets, and that it took a short position against those assets.
It said one experienced CDO trader called the portfolio "possibly the best short EVER!" while an experienced collateral manager said "the portfolio is horrible."
In a statement, Citigroup said the SEC did not charge the unit with any "intentional or reckless misconduct" and that the settlement "resolves all outstanding SEC inquiries into those activities."
The settlement is the third by the SEC against a major bank it accused of marketing a CDO without disclosing it was betting against it or allowing others to do so.
The SEC has also settled cases against Goldman Sachs and JPMorgan.
The agency and criminal prosecutors are under pressure from lawmakers and the public to bring cases that hold Wall Street figures accountable for their role in the 2007-2009 financial crisis that triggered a deep recession.
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