Photo: AP

(Bloomberg) — Citigroup Inc. agreed to pay almost $180 million to settle a U.S. regulator’s allegations that it defrauded clients of two failed hedge funds by telling them the investments were low-risk.

Citigroup units made false and misleading statements to investors about the funds, which raised almost $3 billion from 2002 to 2007, the Securities and Exchange Commission said in a statement Monday. Before the funds collapsed in 2008, Citigroup had described them as “safe” and “bond substitutes,” the SEC said.

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