NEW YORK, May 1, 2008 (PRIME NEWSWIRE) -- The Securities Law Firm of Klayman & Toskes, P.A. ("K&T") (http://www.nasd-law.com) announced today that it is continuing its investigation of the trading practices and supervision by Citigroup (NYSE:C) in several of its funds, ASTA/MAT, Falcon Strategies and CSO Partners ("CSO"). Additionally, the firm is filing securities arbitration claims on behalf of individuals who lost money in these funds.
Investors in Citigroup's ASTA and MAT funds have reported that they have sustained heavy losses. To date, the ASTA and MAT funds have lost about 90% of their original value. Citigroup began offering the ASTA and MAT funds to its customers in 2002 to Smith Barney brokerage clients and private bank customers with more than $5 million in liquid assets. Citigroup represented these funds to be "safe," "secure" and ideal for retirees, as they would provide guaranteed income. With these representations, customers flocked to the funds, investing hundreds of millions of dollars.
The ASTA and MAT funds are essentially two Trusts run by Citigroup. The brokerage firm generated money in the funds by issuing tax-exempt commercial paper and then used the cash to buy municipal bonds that provided higher yields, thereby generating a profit. The funds then hedged against movement in interest rates by essentially reversing that trade, using taxable securities. To bolster returns, the funds were leveraged. Citigroup fund managers then bought the riskiest piece of the bonds issued by the funds. The funds performed well until the credit crunch hit last summer. When that occurred, the ASTA and MAT funds began to fail. As the funds were losing value, Reaz Islam, the manager of the funds, assured brokers and customers that the funds would rebound in value. This only allowed the bleeding to continue, and caused investors to lose even more money.
Klayman & Toskes has also been contacted by investors of Citigroup's CSO Fund. In the wake of heavy investment losses, Citigroup spokesman Jon Diat announced that the firm has "temporarily suspended redemptions of all shares of CSO to stabilize the fund." The Wall Street Journal reported that CSO ran into trouble last November, when it sought to invest a sizeable amount of its assets in a German media company. John Pickett, the manager of CSO, later tried to back out of the deal, but ultimately CSO was forced to buy the debt at face value even though it was trading at about 90 cents on the dollar by that time, The Journal reported. John Pickett has resigned from Citigroup since the deal went bad.
Finally, Citigroup's Falcon Strategies fund lost almost 53% in the fourth quarter of 2007, and is now down about 75% overall. The losses have been largely attributed to the fund betting on mortgage-backed and preferred securities and making trades based on the relative values of municipal bonds and U.S. Treasuries. Some Collateralized Debt Obligations ("CDOs") in the Fund are now worth 25% of their original value.
If you are an investor of Citigroup's ASTA/MAT, Falcon Strategies or CSO Partners Funds, and wish to explore your legal options, or if you have information relevant to our investigation, please contact Steven D. Toskes, Esquire or Jahan K. Manasseh, Esquire of Klayman & Toskes, P.A., at 888-997-9956. You may also visit us on the web at http://www.nasd-law.com.
Klayman & Toskes, P.A., an experienced and nationally recognized securities litigation law firm, continues its representation of investors throughout the world in securities arbitration and litigation matters against major Wall Street brokerage firms.