The case, filed in late 2007, was one of the first major lawsuits related to the toxic investments that fueled the financial crisis in 2008. It's also among the biggest proposed settlements of any crisis-related case.

In a statement, the bank said it is "pleased to put this matter behind us." It called the proposed settlement "a significant step" toward resolving the reams of litigation it faces as a result of the financial crisis.

Attorneys at Kirby McInerney, lead counsel for the class, wrote in court papers that plaintiffs remain convinced the bank "knowingly or recklessly misrepresented" Citigroup's exposure and C.D.O. valuation, but the defendants "have raised a host of factual and legal challenges increasing the uncertainty of a favorable outcome absent settlement."

"Securities fraud litigations like this action are notoriously complex and difficult to prove: rarely is there concrete direct evidence of fraudulent intent," the firm observed.

Citigroup was one of the banks hit hardest by the crisis. As it faltered in the fall of 2008, the government made stronger banks take multi-billion dollar bailouts in part to mask Citi's weakness. Citi took direct bailouts totaling $45 billion and relied heavily on other emergency programs from the Federal Reserve. It has repaid the money with interest.

The bank said in its statement that it is "a fundamentally different company today than at the beginning of the financial crisis," having overhauled its risk management, reduced its risky investments and sold off non-core businesses.

Citigroup said it already has set aside enough money to cover the cost of the settlement.

The deal is the second settlement involving Citigroup this week. In a motion for preliminary settlement approval filed on Aug. 27, lawyers at Robbins Geller Rudman Dowd wrote that Citigroup has agreed to pay $24.9 million to settle a class action brought by investors in Citi mortgage trusts. The suit alleged that Citi negligently misled the investors about the riskiness of the trusts and the underwriting standards used to originate the underlying mortgage loans.

In the motion, Robbins Geller said it will seek attorney fees of no more than 20.5% of the settlement fund and expenses of no more than $850,000. The settlement must be approved by Eastern District Judge Leonard Wexler in Central Islip.

Robbins Geller first brought the case in 2008 against Citi and 18 of its mortgage loan trusts. Siding with Citi's lawyers at Cleary Gottleib Steen & Hamilton, Wexler dismissed 16 of the trusts on standing grounds in early 2010, prompting Robbins Geller to file a pared-down amended complaint in May 2010 against the two remaining trusts.

@|David Bario, a reporter for Law Journal affiliate The Am Law Daily, contributed to this story.