Citigroup sued for fraud over $1 billion of CD0s
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Citigroup Inc was sued for fraud by Loreley Financing over nearly $1 billion worth of collateralized debt obligations purchased in 2006 and 2007.
Citigroup is accused of defrauding Loreley into purchasing "fraudulent investments that are now worthless," Loreley said in a complaint filed Tuesday in New York State Supreme Court in Manhattan.
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Citi used the CDOs to offload the risks of toxic mortgage-backed securities on its books and to help preferred clients "short" the housing market, the lawsuit claims.
Loreley Financing is a group of special-purpose entities formed to invest in CD0s. The entities are organized under the laws of Jersey in the Channel Islands.
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The entities, whose claims include fraud and unjust enrichment, are seeking at least $965 million paid for the notes and buybacks.
The case is Loreley Financing v. Citigroup Global Markets, 650212/2012, New York state Supreme Court (Manhattan).
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