The first lawsuit was filed against Citigroup for allegedly lying to investors about the risks in one of its hedge funds and is seeking class-action status.
Filed in federal court in Florida, the suit accuses Citi Alternative Investments of marketing its Falcon hedge fund strategies as low risk and low volatility to defraud investors through the funds’ “exorbitant fees.”
Falcon Strategies Two B fund lost more than 40% of its value and the potential class-action blames Citi for moving the fund’s assets into a riskier strategy without letting investors know. The class-action covers any investors who put money into the fund between September 30, 2005 and January 8, 2008 when Standard & Poor’s changed the fund’s volatility rating from its second-lowest risk rating to its second-highest. Citi bailed out the Falcon strategies with a $500 million line of credit this past February.
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