A federal appeals court says a judge may have overstepped his authority when he blocked a $285 million settlement over toxic mortgage securities.
The 2nd U.S. Circuit Court of Appeals in Manhattan issued a written ruling Thursday. It suspends the lower court order until it can fully study the case.
Judge Jed Rakoff last year found the deal between the Securities and Exchange Commission and Citigroup to be inadequate. Both the SEC and Citigroup appealed.
"We are pleased that the appeals court found 'no reason to doubt' the SEC’s view that the settlement ordering Citigroup to return $285 million to harmed investors and adopt business reforms is in the public interest," Robert Khuzami, director of the SEC’s Division of Enforcement, said in a statement.
The settlement came after the SEC had accused Citigroup of betting against a complex mortgage investment in 2007. It said the firm made $160 million in the process while investors lost millions.
Rakoff criticized the deal because it did not require Citigroup to admit wrongdoing.