On October 19, 2011, the SEC filed a complaint against Citigroup Global Markets Inc., "based on its role in the structuring and marketing of a largely synthetic collateralized debt obligation ('CDO') called Class V Funding III ('Class V III')." In promoting the CDOs, "the marketing materials Citigroup prepared and distributed to investors did not disclose Citigroup's role in selecting assets for Class V III and did not accurately disclose to investors Citigroup's short position on those assets."

On October 19, 2011, the SEC announced that it "charged Citigroup's principal U.S. broker-dealer subsidiary with misleading investors about a $1 billion collateralized debt obligation (CDO) tied to the U.S. housing market in which Citigroup bet against investors as the housing market showed signs of distress. The CDO defaulted within months, leaving investors with losses while Citigroup made $160 million in fees and trading profits."

On October 19, 2011, the SEC announced that it "charged Citigroup Global Markets Inc. (Citigroup), the principal U.S. broker-dealer subsidiary of Citigroup Inc., with misleading investors about a $1 billion collateralized debt obligation (CDO) called Class V Funding III (Class V III)."

On November 28, 2011, Federal District Judge Jed S. Rakoff refused to approve the proposed Consent Judgment between the SEC and Citigroup Global Markets Inc. Judge Rakoff wrote: "the Court concludes, regretfully, that the proposed Consent Judgment is neither fair, nor reasonable, nor adequate, nor in the public interest. Most fundamentally, this is because it does not provide the Court with a sufficient evidentiary basis to know whether the requested relief is justified under any of these standards."

On December 15, 2011, the SEC's Director of the Division of Enforcement, Robert Khuzami, stated: "Last month, a federal district court declined to approve a consent judgment because, in its view, the underlying allegations were 'unsupported by any proven or acknowledged facts.' As a result, the court rejected a $285 million settlement between the SEC and Citigroup that reasonably reflected the relief the SEC would likely have obtained if it prevailed at trial. We believe the district court committed legal error by announcing a new and unprecedented standard that inadvertently harms investors by depriving them of substantial, certain and immediate benefits. For this reason, today we filed papers seeking review of the decision in the U.S. Court of Appeals for the Second Circuit."

The SEC stated: "Notice is hereby given that the Securities and Exchange Commission, plaintiff in this action, appeals to the United States Court of Appeals for the Second Circuit from the order entered on November 28, 2011, which rejected a proposed consent judgment that the parties presented to the district court and which directed the parties to prepare for trial in July 2012."

On June 4, 2014, the Second Circuit Court of Appeals vacated Federal District Judge Jed S. Rakoff's November 28, 2011 Order rejecting of the SEC and Citigroup Global Markets Inc. settlement. The Court of Appeals decision stated: "We find the district court abused its discretion in by applying an incorrect legal standard in its review, and vacate and remand for further proceedings, consistent with this opinion."

On August 5, 2014, Federal District Judge Jed S. Rakoff entered final judgment against Citigroup Global Markets Inc. pursuant to the SEC and Citigroup Global Markets Inc.'s consent.

- Establishment of a fair fund for disgorgement, prejudgment interest and civil penalty paid by the defendant, plus interest earned on those funds minus any tax obligations, and court administrative fees and combining the CSAC Fair Fund and CGMI fair fund - Appointment of RCB Fund Services as the distribution agent

Motion granting a distribution plan and court order for disbursement of fair fund less CRIS expenses

The 2017 Order established the CGMI Fair Fund to distribute disgorgement, prejudgment interest and a civil penalty paid by Citigroup Global Markets Inc. Pursuant to the Fair Fund provisions of Section 308(a) of the Sarbanes-Oxley Act, the CGMI Fair Fund was to be distributed to investors that were harmed by misrepresentations and omissions of material facts made in connection with the marketing of the collateralized debt obligation called Class V Funding III.