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Saudi Investor’s $383 Million Arbitration Case against Citigroup Has Been Blocked

Tuesday, May, 7, 2013


 

A U.S. District Judge in Manhattan has blocked an arbitration case aimed at Citigroup Inc. over a failed hedge fund that was part of the overall market crash that occurred several years ago.  The arbitration case was initiated in 2011 by Ghazi Abbar, a Saudi businessman, on behalf of himself and his now-deceased father, who was also a participant in the failed investment.  The case involved a $383 million claim and was being overseen by the Financial Industry Regulatory Authority (FINRA), which allows “customers” to arbitrate cases involving securities and investments.    


Revolving around the definition of who qualifies as a “customer” in cases that should be overseen and arbitrated by FINRA, the court’s decision was that Abbar did not qualify.  Specifically, the arbitration case involved Abbar seeking to recoup his losses after the market crash in 2008.  Abbar’s father, Abdullah Mahmoud Abbar, was also involved in the business dealings, which included tourism and importing food with Citigroup Global Markets.  


Both men claim that Citigroup participated in “reckless and deceitful conduct” that would profit the company while financially harming the investors involved.  Many such disappointed investors have turned to arbitration as a solution, since arbitration is often more favorable to litigation in terms of time and money involved.  In most instances, litigated cases are also easier to overturn than arbitrated cases, since an appeal to an arbitration award must usually involve proof that the arbitration contract was unconscionable.    


Judge Louis Stanton, the U.S. District Court Judge responsible for halting the arbitration proceedings, stated that his ruling “gives the financial community reasonable expectations with respect to the rule that will apply."