Citigroup has settled long-running litigation in which AIB accused it of helping rogue currency trader John Rusnak rack up a $691 million loss.

US district judge Deborah Batts in Manhattan on Thursday ordered the dismissal of the 12-year-old case, in which State-controlled AIB sought $500 million (€460.5 million) of compensatory damages plus punitive damages.

In total, AIB had sought $872 million in the lawsuit filed in Manhattan federal court.

Terms of the settlement were not disclosed. The dismissal averts a trial scheduled to begin on January 25th over a fraud that was at the time one of the largest on record to involve unauthorised trades.

Citigroup also resolved related claims against Buffalo, New York's M&T Bank, which in 2003 bought a majority of AIB's Allfirst Bank in Baltimore, where Mr Rusnak worked.

AIB, Citigroup and M&T were not immediately available or had no immediate comment.

The case arose from Mr Rusnak’s having hidden trading losses for at least five years before they were revealed in February 2002.

Sham transactions

AIB accused Citigroup's Citibank unit, which was Allfirst's prime broker, of furthering the fraud by enabling Mr Rusnak's sham transactions, including disguised cash advances and fake trades.

It said this allowed Mr Rusnak to trade more than Allfirst allowed, while pretending his currency bets were legitimate.

Citigroup countered that the evidence did not come close to suggesting it contributed to Mr Rusnak’s losses.

Mr Rusnak had resisted attempts by Citigroup to get him to testify in the case.

In a June 30th decision allowing the case to continue, Judge Batts found “credible” evidence the New York-based bank misled AIB, perhaps hoping to keep Mr Rusnak happy and collect more fees.

Mr Rusnak eventually pleaded guilty to one count of bank fraud, and spent nearly six years in prison.

AIB also sued Bank of America over its dealings with Mr Rusnak, but dropped the lawsuit in January 2012. – Reuters