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Earlier this week, a Financial Industry Regulatory Authority (“FINRA”) Arbitration Panel held Citigroup liable for two investors’ losses in the firm’s ASTA/MAT Funds. The Award represents the third largest amount awarded in FINRA f/k/a NASD arbitration since 1988, and the largest ever to an individual investor. The Award included an order for Citigroup to pay $17 million in punitive damages and $3 million in legal fees.
Following the launch of the ASTA and MAT Funds, Citigroup solicited many of its ultra-high net worth and high net worth customers to invest in the Funds. Within its sales pitch, Citigroup represented the Funds to be fixed income products that could provide higher yields, and that the Funds were “safe” and “secure” investments, not subject to a significant amount of volatility.
According to one claim filed against Citigroup, one type of investment Citigroup promoted to its investors was municipal bond opportunities involving the arbitrage of tax-exempt and taxable bonds. These were actually very risky investments which could drop precipitously if the markets changed, or if the investments were not properly managed. In connection with the marketing of the Funds, Citigroup provided their clients with presentation materials concerning these products. However, the presentation materials are alleged to be false and misleading in that the strategy to be employed would not protect investors as suggested by the ratings of the underlying investments. Further, it is believed that Citigroup failed to implement risk management strategies to prevent the Funds’ management from investing the Funds’ assets in risky and speculative investments.
The attorneys at the Law Firm of KlaymanToskes are continuing to aggressively pursue claims on behalf of investors who have suffered losses in Citigroup’s ASTA and MAT Funds. KlaymanToskes is also processing and/or investigating claims concerning other leveraged municipal bond arbitrage hedge funds. These include Blue River Asset Management, Aravali Fund, GEM Capital, 1861 Capital Management Funds, Rockwater Hedge Fund, LLC, Stone and Youngberg Municipal Advantage Fund, and TW Tax Advantaged Fund.