German Regulator Accuses Citigroup Of Market Manipulation

by Ulrika Lomas, for LawAndTax-News.com, Brussels

26 January 2005

It emerged this week that Germany's financial regulator, BaFin has decided that a controversial bond trade executed by Citigroup last August could constitute market manipulation, and has referred the matter to Frankfurt's public criminal prosecutor.

BaFin reportedly launched an investigation in October into the trade by Citigroup Global Markets, which sold around EUR11.8 billion in European government bonds over 13 different trading platforms and in 11 different markets, causing their prices to collapse as traders sought to cut their losses.

The Citigroup unit then bought back around EUR4 billion in bonds at the lower prices an hour later, in a move described by CEO Charles Prince as a "completely knuckleheaded thing to do".

Speaking to the Wall Street Journal this week, spokesman for the group, Daniel Noonan announced that:

"We are disappointed that the BaFin has referred to the prosecutor the question of whether action should be brought against individuals involved in the...matter."

However, he added that:

"We will continue to cooperate fully with all authorities reviewing the matter."

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