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Securities Arbitration Panel Rules for Citigroup

Tuesday, November, 8, 2011

A securities arbitration case between Citigroup, a large U.S. banking interest, and ADIA, the Abu Dhabi Investment Authority, has been decided.  Citigroup announced this week that it won each and every claim presented to the arbitration panel.  At issue was an investment of $7.5 billion that ADIA has made in the bank. 


ADIA claimed that its large investment would not have occurred were it not for statements made by Citigroup that the sovereign investment fund claimed were fraudulent.  The Abu Dhabi fund attempted to cancel the investment, but still wanted $4 billion in compensatory damages even if allowed out of the investment.


Securities Arbitration Panel Weighed Subprime Crisis


One reason Citigroup did not perform as forecast was because of the subprime mortgage crisis that began in 2007 and has yet to be fully resolved.  Many banks have been scrutinized for their conduct related to issuing securities backed by mortgages that had been repackaged into bulk investments.  Citigroup was heavily involved in this type of business, as were other major banks in the United States.  In fact, only two banks in the nation are larger than Citigroup. 


The arbitration panel found in favor of Citigroup and decided not to allow the Abu Dhabi sovereign wealth fund to reverse its decision to invest in Citigroup.  Neither was ADIA awarded any damages in the case.