Credit Default Swaps Matters
In April 2011, the European Commission (EC) opened an investigation (Case No COMP/39.745) into the credit default swap (CDS) industry. The scope of the
investigation initially concerned the question of whether 16 investment banks and Markit, the leading provider of financial information in the CDS market, have colluded and/or may hold and abuse a dominant position in order to control the
financial information on CDS. On July 2, 2013, the EC issued to Citigroup, CGMI, CGML, Citicorp North America Inc. and Citibank, as well as Markit, ISDA, and 12 other investment bank dealer groups, a statement of objections alleging that
Citi and the other dealers colluded to prevent exchanges from entering the credit derivatives business in breach of Article 101 of the Treaty on the Functioning of the European Union. The statement of objections set forth the ECs preliminary
conclusions, did not prejudge the final outcome of the case, and did not benefit from the review and consideration of Citis arguments and defenses. Citigroup filed a Reply to the Statement of Objections on January 23, 2014, and made oral
submissions to the EC on May 14, 2014. On December 4, 2015, the EC informed Citi that it had closed its proceeding against Citi and the other investment bank dealer groups, without further action.
In addition, putative class action complaints were filed by various entities against Citigroup, CGMI and Citibank, among other defendants, alleging
anticompetitive conduct in the CDS industry and asserting various claims under Sections 1 and 2 of the Sherman Act as well as a state law claim for unjust enrichment. On October 16, 2013, the U.S. Judicial Panel on Multidistrict Litigation
centralized these putative class actions in the Southern District of New York for coordinated or consolidated pretrial proceedings before Judge Denise Cote. On September 4, 2014, the United States District Court for the Southern District of New
York granted in part and denied in part defendants motion to dismiss the second consolidated amended complaint, dismissing plaintiffs claim for violation of Section 2 of the Sherman Act and certain claims for damages, but permitting
the case to proceed as to plaintiffs claims for violation of Section 1 of the Sherman Act and unjust enrichment. On September 30, 2015, the defendants, including Citigroup, Citibank, and related parties, entered into settlement
agreements to settle all claims of the putative class, and on October 29, 2015 and April 16, 2016, the court granted plaintiffs motion for preliminary approval and final approval of the proposed settlements, respectively. Additional
information relating to this action is publicly available in court filings under the docket number 13 MD 2476 (S.D.N.Y.) (Cote, J.).
On June 8,
2017, a complaint was filed in the United States District Court for the Southern District of New York against numerous credit default swap (CDS) market participants, including Citigroup, Citibank, Citigroup Global Markets Inc. (CGMI), and Citigroup
Global Markets Ltd. (CGML), under the caption TERA GROUP, INC., ET AL. v. CITIGROUP INC., ET AL. The complaint alleges that defendants colluded to prevent plaintiffs electronic CDS trading platform, TeraExchange, from entering the market,
resulting in lost profits to plaintiffs. The complaint asserts federal and state antitrust claims, and claims for unjust enrichment and tortious interference with business relations. Plaintiffs seek a finding of joint and several liability, treble
damages, attorneys fees, interest, and injunctive relief. On September 11, 2017, defendants, including Citigroup, Citibank, CGMI, and CGML, filed motions to dismiss all claims. On July 30, 2019, the court granted in part and denied
in part defendants motion to dismiss. On September 27, 2019, Citi filed its answer. Pursuant to a stipulation between the parties, the plaintiffs will file an amended complaint by January 30, 2020. Additional information concerning
this action is publicly available in court filings under the docket number 17-cv-04302 (S.D.N.Y.) (Sullivan, J.).
Depositary Receipts Conversion
Litigation
Regulatory Actions: On November 7, 2018, the SEC entered an order accepting an offer of settlement from Citibank concerning the
SECs investigation into activity relating to pre-released American Depositary Receipts from 2011 to 2015. While neither admitting nor denying the SECs allegations, Citibank agreed to a violation under Section 17(a)(3) of the
Securities Act, as well as disgorgement of $20,903,858.25 and pre-judgment interest of $4,258,893.71 plus a civil money penalty of $13,587,507.86 for a total of $38,750,259.82.
Other Litigation: In 2015, Citibank was sued by a purported class of persons or entities who, from January 2000 to the present, are or were holders of
depositary receipts for which Citibank served as the depositary bank and converted, or caused to be converted, foreign currency dividends or other distributions into U.S. dollars. On March 23, 2018, the court granted in part and denied in part
plaintiffs motion for class certification, certifying only a class of holders of Citi-sponsored American depositary receipts that plaintiffs own. On September 6, 2018, the court granted preliminary approval of a class action settlement.
On July 12, 2019, the court granted final approval. Additional information concerning this action is publicly available in court filings under the docket number 15 Civ. 9185 (S.D.N.Y.) (McMahon, C.).
Foreign Exchange Matters
Regulatory Actions: Government
and regulatory agencies in the U.S. and in other jurisdictions are conducting investigations or making inquiries regarding Citigroups foreign exchange business. Citigroup is fully cooperating with these and related investigations and
inquiries.
On May 20, 2015, Citigroup entered into a settlement with the Federal Reserve Board. The settlement was binding on Citigroup, Citibank,
and related Citi entities, and it related to allegedly deficient policies and procedures that purportedly failed to detect foreign exchange activities that violated sound baking practices and applicable U.S. laws and regulations.
In 2017, the Competition Commission of South Africa confirmed a Consent Agreement with Citibank resolving allegations that between September 2007 and October
2013, Citibank and its affiliates engaged with non-Citi market participants in certain collusive conduct with regards to trading in FX involving the South African Rand (ZAR) in violation of South African law. A penalty of ZAR 69,500,860 was paid.
This was the equivalent of between US $5M and $5.5M.
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