A securities class action has been filed against Citigroup Inc. (C) on behalf of all investors who purchased or otherwise acquired Citi’s common stock between February 25, 2017 through October 12, 2020. This case has been filed in the USDC – S.D.N.Y.
The Complaint alleges that throughout the Class Period, Citi assured investors that there were no significant deficiencies or material weaknesses in the Company’s internal controls. When faced with periodic regulatory penalties for noncompliance, the Company continued to assure investors that the specific deficiencies at issue were being remediated promptly and that internal controls and regulatory compliance were a top priority at Citi. In particular, Citi assured investors that it satisfied all regulatory requirements and maintained adequate internal controls, data governance, compliance risk management, and enterprise risk management.
In reality, during the Class Period and unbeknownst to investors, Citi’s internal controls and risk management capabilities suffered from “serious” and “longstanding” inadequacies that exposed the Company to massive regulatory penalties and will cost significantly more than $1 billion to remediate. Specific control failures about which Citi executives were warned remained unresolved for years and the Company’s culture of non-compliance was so widespread that Citi’s CEO, Defendant Michael Corbat, exhorted employees in an internal memo that regulatory compliance required more than “checking boxes.”
The truth began to emerge on September 14, 2020, when reports surfaced that regulators were preparing to reprimand Citi for failing to improve its risk-management systems. That disclosure caused the price of Citi’s stock to decline $2.85 per share, from $51.00 to $48.15, erasing $5.91 billion in shareholder value.
After the market closed on September 14, 2020, an internal memo sent to employees revealed for the first time the Company’s disregard for adequate internal controls and regulatory compliance. As a result, the price of Citi’s stock declined an additional $3.34 per share, from $48.15 to $44.81, erasing $6.93 billion in shareholder value.
Then, on October 13, 2020, Citi reported earnings for the third quarter of 2020, and disclosed that the Company’s expenses increased during the third quarter by 5%, to $11 billion, due to an increase in costs including a $400 million fine, investments in infrastructure, and other remediation costs related to control deficiencies. These disclosures caused Citi’s stock price to decline by $2.20 per share, from $45.88 to $43.68, erasing $4.57 billion in shareholder value.
In total, as a result of Citi’s deception relating to its internal controls and compliance systems, $17.43 billion of shareholder value has evaporated and class members were the ones who suffered from the Defendants’ actions.