Citigroup CSO Fund Investor Sues to Recover $400 Million

Citigroup Alternative Investments LLC was sued by an investor seeking to recover $400 million lost in the bank’s Corporate Special Opportunities fund.

David Beach, of the U.K., accused the unit of New York-based Citigroup Inc. of misleading investors about ill-fated trades in the debt of German firm ProSiebenSat.1 Media AG, one of the largest broadcasters in Europe.

The now-defunct CSO fund suffered severe losses after its founder, John Pickett, leveraged the fund’s assets to buy about 558 million euros’ ($730 million) worth of debt in the offering by the German firm, according to the complaint filed in Manhattan federal court. Pickett resigned in December 2007, according to the complaint.

“Investors were not informed that his departure was the result of his breaches of the fund’s investment restrictions,” lawyers for Beach, Jacob Zamansky and David Straite, said in the complaint.

Citigroup Alternative Investments has since been restructured and part of it has been renamed Citi Capital Advisors, according to the bank. Danielle Romero-Apsilos, a spokeswoman for Citigroup, declined to comment on the suit.

In April 2008, hedge fund firm Robeco-Sage Capital LP also filed a lawsuit alleging it had suffered damages from Pickett’s “disastrous” investment in the German firm. The case, brought in Manhattan state court, is no longer active, according to court records.

The federal case is Beach v. Citigroup Alternative Investments LLC, 12-cv-7717, U.S. District Court, Southern District of New York (Manhattan).

The state case is Robeco-Sage Capital v. Citigroup Alternative Investments LLC, 601030/2008, New York Supreme Court (Manhattan).

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