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Home > Cases > Citigroup > Litigation Over ASTA and MAT 5 Hedge Funds Heats Up For Citigroup

Litigation Over ASTA and MAT 5 Hedge Funds Heats Up For Citigroup

Stricken by the current credit crunch, two of Citigroup's hedge funds, ASTA and MAT 5, have plummeted in value, prompting lawsuits from investors who say they were unaware of the inherent risk in the funds and their aggressive investment strategies.

The funds at issue: ASTA Finance Fund (ASTA) and MAT Finance LLC Fund (MAT), used substantial leverage to purchase municipal bonds, borrowing approximately $8 for every $1 raised, according to some reports. When the credit crunch began to take its toll, the funds plunged in value. Today, even after a cash infusion of more than $660 million by Citigroup, both funds are down nearly 90 percent.

When the ASTA and MAT funds initially became available to investors, they were marketed by Citigroup's Smith Barney unit to high net worth clientele and private bank customers, including a number of retirees. According to plaintiffs who have filed lawsuits against Citigroup, the funds were presented as “safe” fixed-income investments, that offered slightly higher yields and low volatility.

Clients quickly latched onto the funds, investing hundreds of millions of dollars. However, they soon discovered, that these “safe” investments were highly volatile and risky.

The major complaints in the lawsuits have focused on the marketing tactics used by brokers who sold the funds to investors. Investors feel betrayed because they had been given the impression these investments were safe.

Investors also contend that Citigroup failed to implement sufficient risk management strategies that would prevent the funds' management from investing the ASTA and MAT assets in risky and speculative investments. When the ASTA and MAT hedge funds began losing value, Citigroup management assured brokers and customers things would rebound quickly. That didn't happen. The bleeding simply continued, causing investors to lose even more money. Now, many investors are seeking legal recourse. Aggrieved customers need to discuss their options with an experienced securities lawyer.

At the heart of Citigroup's current ASTA and MAT hedge fund problems is the issue of accountability. Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.


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