Did you invest in Citgiroup Alternative Investments known as MAT or ASTA Funds?

This information is for investors who opted out of the MAT Five class action by December 5, 2008, or investors in the ASTA funds. In 2002, Citigroup began offering the MAT and ASTA funds to brokerage clients of Smith Barney and private bank customers who had more that $5 million in liquid assets. The bank had used a similar trading strategy for many years to invest its own funds. The strategy worked by having Trusts, which Citigroup was a part of, borrow money by issuing tax-exempt commercial paper, and then using the cash, which was raised, to purchase municipal bonds which had slightly higher yields, thus profiting the difference. The trusts then used taxable securities to reverse their trade, and thus hedged against big swings in interest rates. They proceeded to pile on the leverage in an attempt to increase their returns. The fund managers at Citigroup then proceeded to purchase the riskiest piece of the bonds issued by the trust.

Towards the end of 2007, this trading scheme was proving unsuccessful; and by March, 2008 essentially became a failed venture. The failure was a result of the market downturn, which was pounding municipal bond yields, but at the same time the yields on taxable bonds were increasing tremendously. The hedges on the trades were losing money, which resulted in a number of the funds’ half-dozen lenders, including Citigroup, to become preoccupied and issue margin calls.

Although marketed as relatively safe fixed income investments, these were actually very risky investments which could drop precipitously if the markets changed, or if the investment were not properly managed.

It has been alleged that Citigroup has falsified and misrepresented their Private Placement Memorandum, which essentially lead investors to invest in this risky fund without knowing that is was in actuality a risky fund. After the credit crunch occurred, the cash positions and net asset values of the MAT Five fund has been severely and negatively impacted. Investors of the MAT five funds had no idea why this had occurred and were left with a substantial loss to their investments.

Sonn | Erez is currently representing investors in MAT Five and ASTA Funds and is conducting an investigation into the sale of MAT Five and ASTA funds. If you have information or wish to discuss your rights as an investor, contact us at 844-689-5754 or contact Jeff Sonn, Esq. at jsonn@sonnerez.com or Jeff Erez at jerez@sonnerez.com, or Stefan Apotheker at sapotheker@sonnerez.com.

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