Citigroup Inc.(NYSE:C) on Wednesday agreed to settle a lawsuit, filed by shareholders who had accused it of hiding toxic mortgage assets worth billions of dollar, for $590 million.
The lawsuit, which was filed in the aftermath of the global financial crisis in 2008, claimed that the bank had not taken proper precaution in terms of timely write-downs of its mortgaged securities that had gone bad, and the shareholders had ended up with massive losses.
Citigroup, while agreeing to settle, denied any wrongdoing on its part. It said the settlement amount would be covered by its existing reserves and called the settlement a, "significant step toward resolving our exposure to claims arising from the period of the financial crisis."
U.S. District Judge Sidney Stein in Manhattan on Wednesday granted preliminary approval to the settlement, and scheduled a January 15, 2013 hearing to consider final approval.
Major banks have been sued by investors for losses sustained by them during the period of the financial crisis that led to many banks going bust or bankrupt.
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In 2010, Bank of America agreed to a $601.5 million settlement related to its Countrywide mortgage unit.
Last year, Wells Fargo & Co reached a $590 million payout settlement over loans and securities from the former Wachovia Corp.
"Based on the allegations and the risks we faced in establishing liability and damages, and in comparison with other securities fraud class-actions, the settlement is a very good result for the class," Ira Press, a partner at Kirby McInerney representing the shareholders, told Reuters in an interview.
Shares in Citi closed at $29.91 in New York.