Citigroup’s ASTA and MAT Funds

The ASTA and MAT funds are essentially two Trusts run by Citigroup. The brokerage firm generated money in the funds by issuing tax-exempt commercial paper and then used the cash to buy municipal bonds that provided higher yields, thereby generating a profit. The funds then hedged against movement in interest rates by essentially reversing that trade, using taxable securities. To bolster returns, the funds were leveraged. Citigroup fund managers then bought the riskiest piece of the bonds issued by the funds. The funds performed well until the credit crunch hit last summer. Moreover, as the Funds were losing value, Reaz Islam, the manager of the Funds, assured brokers and customers that the Funds would rebound in value. This only allowed the bleeding to continue, and caused investors to lose even more money.

Citigroup represented these funds to be “safe”, “secure” and ideal for retirees, as they would provide guaranteed income. With these representations, customers flocked to the funds, investing hundreds of millions of dollars. Many of these retirees are now financially devastated due to the misrepresentations and mismanagement of the funds by Citigroup. To date, the ASTA and MAT funds have lost about 90% of their original value.
Citigroup sent a letter to MAT Fund investors on March 20, 2008. In the letter, the firm advised investors that the credit crisis had spread into the municipal bond markets. Consequently, the cash positions and net asset values of the MAT Five fund had been severely impacted, and Citigroup would therefore suspend MAT Five’s income distributions indefinitely. The freeze on distributions was an attempt to preserve liquidity in the Fund.
Presently, Klayman & Toskes is filing arbitration claims against Citigroup in the FINRA arbitration forum to recover losses in the ASTA and MAT funds.

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