Citigroup Inc has agreed to pay $158.3 million to settle U.S. civil claims that it defrauded the government into insuring thousands of risky home loans made by its CitiMortgage unit.  Wednesday’s settlement resolves claims under the federal False Claims Act against the third-largest U.S. bank, and arose from a “whistleblower” lawsuit brought by Sherry Hunt, a CitiMortgage employee in Missouri.

CitiMortgage “admits, acknowledges and accepts responsibility” for misleading the government into insuring risky home loans, according to settlement papers filed in U.S. District Court in New York. Investigators said the misconduct lasted for more than six years.

The civil fraud case is part of a crackdown by the Department of Justice against lenders it believes contributed to the housing crisis by originating risky home loans that should not have been made, insured or sold.  Whistleblowers can receive up to 25 percent of settlements reached with the government in such cases, depending on how much work they contributed.

Massachusetts’ securities regulator on Friday subpoenaed Bank of America Corp. in connection with its involvement in two loan securities that resulted in $150 million in losses for investors.

William Galvin, the secretary of the commonwealth, is examining whether Bank of America knowingly overvalued the assets in the portfolios in order to get the loans off its books, according to a statement on Friday.

Mr. Galvin’s office has been investigating how banks structured and sold a variety of debt products in the run-up to the financial crisis, particularly mortgage-backed securities. The state was aggressive in its push to recoup investor money lost when the auction-rate securities market went bust four years ago.

In an interview on Friday, Mr. Galvin said he may seek documents from other banks. “We are definitely interested in other entities.”

Bank of America and four other banks agreed on Thursday to pay $25 billion to settle with a variety of state and federal regulators over alleged foreclosure abuses. That settlement leaves the door open for regulators to target the banking industry’s securitization practices.

The industry-backed regulator wants to make sure the so- called structured CDs, where principal is protected by the Federal Deposit Insurance Corp., are properly understood by investors given their increasing complexity and lengthening maturities, said Maria Rabinovich, a lawyer in Finra’s risk division. The watchdog issued an alert on complex products in January, without referring to the CDs. The notice avoided defining what constitutes such products, while outlining a few examples, such as those where information is not readily available about the assets they’re tied to, and so-called “steepeners,” which typically bet on the shape of the Treasury yield curve.

Demand for derivative-linked certificates of deposit has risen as the Fed holds rates below 0.25 percent for the third straight year. Yields on five-year, fixed- rate CDs have declined to 1.55 percent, the lowest level since at least June 1998, according to Bankrate.com.

Banks sold a record 1,271 of the investments in the U.S. last year, according to StructuredRetailProducts.com, a database used by the industry. Statistics on total volume are incomplete because banks aren’t required to register issuance with the Securities and Exchange Commission, and the FDIC doesn’t track the products separately.

On February 6, 2012, the Securities and Exchange Commission charged Glencoe, Illinois resident Kenneth A. Dachman with misappropriating over $1.8 million in investor funds and making false and misleading statements to investors in offerings for three companies for which he was the Chairman – Central Sleep Diagnostics, LLC (Central Sleep), Central Sleep Diagnostics of Florida, LLC (Central Sleep Florida), and Advanced Sleep Devices, LLC (Advanced Sleep). The SEC also charged Scott A. Wolf and his company, Stone Lion Management, Inc., the brokers for the three offerings, for their roles in selling unregistered securities to investors.

Filed in the U.S. District Court for the Northern District of Illinois, the SEC’s complaint alleges that between July 2008 and June 2010, Dachman raised at least $3,594,709 from investors located in 13 states and 12 foreign countries on behalf of Central Sleep, a purported provider of outpatient diagnostic sleep studies. Between December 2008 and April 2010, Dachman raised an additional $567,399 on behalf of Central Sleep Florida, a purported expansion of Central Sleep into Florida, and Advanced Sleep, a purported provider of medical devices. According to the complaint, Dachman made numerous misrepresentations to investors in each of the companies, including misrepresentations about how their funds would be used and his academic and business backgrounds. Dachman also failed to tell investors that he misappropriated at least $1,875,739 of their funds, over 45% of the total funds raised. According to the SEC’s complaint, among other things, Dachman used investor funds to rent-to-own a 10,000 square foot home, to pay for family vacations to Alaska, Europe and elsewhere, to purchase a new Range Rover, books, collectibles and antiques, and for personal expenses and credit card bills. Dachman also diverted investor funds to a tattoo parlor that he co-owned with his son-in-law.

The Securities and Exchange Commission announced today that Chief Judge Gregory M. Sleet of the United States District Court for the District of Delaware entered final judgments against Defendants Nathan M. Michaud and Gerard J. D’Amaro on January 24, 2012, and Defendant Marc J. Riviello on February 3, 2012, in SEC v. Dynkowski, et al., Civil Action No. 1:09-361, a stock manipulation case the SEC filed on May 20, 2009, and amended on March 25, 2010 to charge additional individuals. The SEC’s complaint alleges that Michaud, D’Amaro, and Riviello each participated in market manipulation schemes with Defendant Pawel P. Dynkowski.

As alleged in the complaint, the schemes generally followed the same pattern: Dynkowski and his accomplices agreed to sell large blocks of shares for penny stock companies in exchange for a portion of the proceeds. The shares were put in nominee accounts that Dynkowski and his accomplices controlled. The defendants artificially inflated the market price of the stocks through manipulative trading, often timed to coincide with false or misleading press releases, and then sold shares obtained from the issuers and divided the illicit proceeds.

The complaint alleges that in 2006, Dynkowski, Riviello, Michaud and others participated in a manipulation scheme involving the stock of Asia Global Holdings, Inc., which generated over $4 million in illicit profits. As alleged in the complaint, Dynkowski and Michaud manipulated the price of Asia Global Holdings, Inc. stock using wash sales, matched orders, and other manipulative trading, while Riviello used his position as a registered representative at a broker-dealer to open a series of nominee accounts and execute sell orders for shares obtained from the issuer. The complaint further alleges that Riviello helped launder proceeds from a separate manipulation scheme involving the stock of GH3 International, Inc.

That same year, the complaint alleges, Dynkowski, D’Amaro and others participated in a manipulation scheme involving the stock of Playstar Corp., which generated over $1 million in illicit profits. As alleged in the complaint, D’Amaro arranged for the company to issue misleading press releases that coincided with Dynkowski’s manipulative trading. The complaint further alleges that D’Amaro provided the nominee accounts that were used to sell the shares received from the issuer.

To settle the SEC’s charges, D’Amaro consented to a final judgment that permanently enjoins him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 (“Securities Act”), and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder, orders disgorgement of $177,044 and prejudgment interest of $40,859, and bars D’Amaro from participating in any offering of a penny stock. In a related criminal case, D’Amaro previously pled guilty to conspiracy to commit securities fraud and engage in money laundering and was sentenced to three years in prison and ordered to pay criminal forfeiture of $1.49 million. U.S. v. D’Amaro, Criminal Action No. 09-54-SLR (D. Del.).

Citigroup Inc., JPMorgan Chase & Co. and 15 other underwriters reimbursed California $2.3 million last year after a regulatory probe found they used taxpayer funds to pay fees to their lobbyists.

Citigroup, the third-biggest U.S. bank by assets, returned $479,994, while Bank of America Merrill Lynch repaid a combined $456,482 and JPMorgan paid $490,449 for itself and Bear Stearns Cos., which it acquired, according to a spreadsheet California Treasurer Bill Lockyer’s office sent to the Financial Industry Regulatory Authority. The documents were obtained by Bloomberg News through a California Public Records Act request.

The repayments were about 50 percent more than Lockyer had estimated was owed a year ago, when the practice was uncovered in a Finra investigation of the California Public Securities Association, which lobbies state officials for the municipal- bond industry.

Generally held by large investment funds, catastrophe bonds — more familiarly known as cat bonds — were created to offset the risk of natural disasters on insurance companies. The upside to cat bonds is based on the likelihood that a catastrophe will occur, such as a one-in-100-year event versus a one-in-five-year event. If the disaster doesn’t occur, investors are paid a sizeable return; if it does, the insurance companies can use some or all of the principal to cover the resulting losses. Retail investors typically haven’t been involved in cat bonds, but a recently-launched fund — the GAM Star Cat Bond fund, managed by a company that has a portfolio of upwards of 40 cat bonds — allows investors to gain access to the market for an investment of $10,000.

U.S. regulators are altering plans for a multibillion-dollar computer system to monitor trades on stock exchanges and other markets to blunt criticism that the project would be expensive and to speed the system’s implementation.

The Securities and Exchange Commission won’t require firms to report comprehensive trading information to the agency in real time as originally proposed, a concession that is welcomed by the financial industry and that experts said would make the system significantly cheaper. Regulators believe that even with a slower system than their original proposal, they would be able to better understand market disruptions such as the May 2010 “flash crash.”

Lake Forest resident John E. Walsh, 63, has been sentenced to 12.5 years in federal prison after pleading guilty to fraud charges for operating a Ponzi-type scheme dating back to 2007.

Walsh was sentenced just a day before his partner, Charles G. Martin, 46, formerly of Glencoe, was hit with a 17 year prison sentence on Thursday (Feb. 2). Together, their business, One World Capital Group, LLC, hooked 1,000 investors worldwide to lose nearly $17 million.

According to a press release from the U.S. Attorneys Office, both men were arrested and charged in January 2009 and chose to cooperate with the government and pleaded guilty in May 2011 to wire and commodities fraud and tax evasion counts.

Martin and Walsh formed One World Capital Group, LLC, in 2005, in Winnetka, and added an office in New York.

In December 2007, the Commodity Futures Trading Commission (CFTC) obtained a court order prohibiting further trading activity and freezing the firm’s remaining assets, which totaled $677,932.

At the same time, One World had approximately $17,654,486 in unpaid customer liabilities. The CFTC and the National Futures Association assisted in the investigation.

Laurie Schneider, of Oceanside, New York, has been indicted for operating Ponzi schemes that defrauded investors of more than $4 million.1 The defendant was arraigned earlier today before United States Magistrate Judge A. Kathleen Tomlinson at the United States Courthouse, 100 Federal Plaza, Central Islip, New York.

The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Janice K. Fedarcyk, Assistant Director in Charge of the Federal Bureau of Investigation, New York Field Office.