Karen Freifeld
NEW YORK (Reuters)
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.
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.
Danielle Romero-Apsilos, a spokeswoman for Citigroup, said in an email, "We believe the suit is without merit."
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.
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.
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