Southern District Judge Jed S. Rakoff (See Profile) yesterday rejected a proposed $285 million settlement between the Securities and Exchange Commission and Citigroup over the marketing of collateralized debt obligations the bank was also selling short.

Judge Rakoff said Citigroup created a billion-dollar fund “that allowed it to dump some dubious assets on misinformed investors” but was allowed to settle the case with no admission of wrongdoing. There was “an overriding public interest in knowing the truth,” he said, and he would not approve the settlement without some “cold, hard, solid facts.”

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