USA Today published an article yesterday reporting that Citigroup has been forced to pay at least $85 million to investors in its disastrous MAT/ASTA municipal arbitrage hedge funds. “Investor hedge fund claims costs Citigroup $85M and counting,” by Kevin McCoy, USA Today). That amount does not include payments made by Citigroup to at least 39 other MAT/ASTA investors pursuant to confidential settlements, and Citigroup may well be forced to pay another $50 million or more as dozens more arbitrations go to hearings in 2012 and 2013, according to the article.
The article notes that the Securities and Exchange Commission has been investigating Citigroup’s management and marketing of MAT/ASTA funds for almost 4 years. Former investors told USA Today that Citigroup financial advisors told them the funds would generate returns of 6% to 8%. “I certainly wasn’t going to risk losing capital for a 6% to 8% return,” said one investor who lost $700,000.