Citigroup's settlement was to compensate investors who lost Money on mortgage assets
A US judge has rejected a $285m (£184m) settlement between Citigroup and Wall Street's regulator, the SEC, over the sale of toxic mortgages.
Federal court judge Jed Rakoff ordered a trial, saying the settlement was "neither reasonable, nor fair, nor adequate, nor in the public interest".
The SEC claimed Citigroup sold $1bn worth of Mortgage Assets and then bet that their value would fall.
Neither the SEC nor the US's third-largest bank had any immediate comment.
In a written opinion, the Manhattan judge said the allegations against Citigroup should go to trial.
Under the settlement, agreed in October, Citigroup was to pay $285m to compensate investors for losses on the mortgage assets, which plunged in value months after the bank sold them in 2007.