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 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.

The Court ordered: "1. A Fair Fund is created pursuant to Section 308(a) of Sarbanes-Oxley Act of 2002 . . . ; 3. RCB Fund Services, LLC ("RCB') is appointed to serve as the Distribution Agent."

The Court ordered: "The Distribution Plan is approved. . . . The Clerk of Court shall disburse the CGMI Fair Fund, less CRIS expenses, to the Distribution Agent, who shall commence distribution to the eligible investors in the accordance with the procedures set forth in the Distribution Plan."

The SEC stated: "The Distribution Agent made three pro rata payments to the eligible investors (Ambac, BNP Paribas, and Basis) equal to 58.73% of their losses. . . . The Distribution Agent is now working with the Tax Administrator to ensure that all tax obligations are properly satisfied before the CGMI Fair Fund can be terminated."