Citi Urges Dismissal of $1.3 Billion Lehman Suit

(May 30, 2011) — Citigroup, the third largest US bank by assets, has asked a judge to dismiss a $1.3 billion Lehman Brothers lawsuit.

The lawsuit was brought by a trustee overseeing the liquidation of Lehman.

According to a court filing obtained by Bloomberg, Citigroup lent Lehman’s brokerage more than $15 billion after Lehman went bankrupt in September 2008. In a March lawsuit, trustee James Giddens demanded that Citigroup return more than $1.3 billion in cash and other assets that he said the bank seized or froze in violation of bankruptcy law, in order to cut its risk during the financial crisis. Specifically, Giddens asserted that Citibank seized $1 billion that the brokerage pledged to it for settling foreign exchange trades, and froze another $300 million of the brokerage’s assets around the world, the news service reported.

Citigroup has claimed that the trustee’s efforts to recoup most of the money “fail on multiple independent grounds” of the law. Also according to Citigroup, Lehman’s collapse led to $1.26 billion in unpaid expenses related to FX clearing.

Lehman’s claim against Citigroup follows efforts by JPMorgan Chase & Co’s earlier this month, when it urged a bankruptcy court to throw out Lehman’s claim demanding that it pay $8.6 billion in cash taken as collateral in the weeks before Lehman imploded in September 2008.