Twelve years after Allied Irish Banks Plc (AIB) filed a securities lawsuit against Citigroup (C) accusing the bank of helping a rogue trader conceal about $691 million in losses, the case is slated to go to trial next month. AIB reportedly wants $872M from the New York-based bank— $372M in damages and about $500M in pre-judgment interest.
It was in 2003 that AIB sued Citigroup subsidiary Citibank and Bank of America Corp. (BAC). AIB contends that the defendants were linked to a scam that led to significant losses for its former unit, Allfirst Financial. Bank of America has already settled the allegations against it.
In 2002, trader John Rusnak’s losses were discovered and he pleaded guilty to banking fraud. Rusnak admitted to concealing $691M in trading losses while employed at Allfirst. The losses were sustained over five years and came from primarily trading the Japanese yen and for taking even bigger risks as he sought to get back some of these losses.
While Rusnak did not make a direct profit from the losses, he made over $650K in bonuses when he made it appear as if Allfirst was making money. He was released from prison in 2009.
AIB’s complaint said that in 2000, Citibank and Bank of America opened brokerage accounts for Rusnak and he used those accounts to trade foreign currency. AIB claims that both financial institutions helped the rogue trader conceal his growing losses by taking out certain information in reports.
Citibank maintains that its employees did not commit fraud nor did they abet or aid anyone else’s fraud. It claims that AIB has yet to come up with a witness or even one document showing proof that a Citi employee was involved in Rusnak’s scam.
In other news involving a bank named in a securities case, Standard Bank, now called ICBC Standard Bank Plc, has consented to pay $4.2 Million to resolve SEC charges accusing it of not disclosing certain payments related to debt used by Tanzania’s government in 2013. Standard Bank was the lead manager for the offering. The undisclosed payments were made by an affiliate to a firm that got part of the proceeds from the $600M offering, even though it did not play a key role in the transaction.
In addition to paying the more than $4M penalty to the regulator, ICBC Standard Bank has admitted to the facts underlying the charges. The bank also has settled charges over this matter with the U.K.’s Serious Fraud office and will pay a $16.8M fine, $8.4M disgorgement, and $500K in costs. The bank will pay $7.05M to the government of Tanzania.
Our securities fraud law firm represents institutional investors and high net worth individual investors in recouping their losses. We know that the stakes in an institutional investor fraud case can be high and losses sustained may affect thousands of individuals. We take our clients’ cases very seriously. Over the years, The SSEK Partners Group has helped thousands of investors recoup their money.
AIB Seeks $872 Million From Citigroup in Rogue Trader Clash, Bloomberg, November 27, 2015
Allied Irish can sue Citigroup over rogue trader Rusnak-U.S. judge, Reuters, July 1, 2015
Standard Bank to Pay $4.2 Million to Settle SEC Charges, SEC, November 30, 2015