Citigroup settlement updated to reflect that Brian Stoker is no longer an employee at the bank.NEW YORK ( TheStreet) -- Citigroup ( C) will pay the Securities and Exchange Commission $285 million to settle charges that it misled investors in a sale of securities backed by mortgages that it bet against. The regulator alleged that Citigroup Global Markets structured and marketed a collateralized debt obligation called Class V Funding III and had a significant say in the selection of the $ 500 million assets that made up the portfolio. Citigroup then took a proprietary short position against those mortgage-related assets from which it would profit if the assets declined in value. Citigroup did not disclose to investors its role in the asset selection process or that it took a short position against the assets it helped select, the SEC said. The SEC also filed charges against Brian Stoker, the Citigroup employee responsible for the transaction. Stoker is no longer an employee of Citigroup. One trader characterized the portfolio as the "possibly the best short EVER" , while another said "the portfolio is horrible," according to emails unearthed by the SEC. The transaction closed on Feb.28, 2007. In November, the entire tranche was downgraded and subsequently declared to be in default. The approximately 15 investors in transaction lost virtually their entire investments, the regulator said, while Citigroup received fees of approximately $34 million for structuring and marketing the transaction and additionally realized net profits of at least $126 million from its short position. "The securities laws demand that investors receive more care and candor than Citigroup provided to these CDO investors," said Robert Khuzami, director of the SEC's Division of Enforcement. "Investors were not informed that Citgroup had decided to bet against them and had helped choose the assets that would determine who won or lost." Citigroup in settling neither admits nor denies the findings. The company said in a statement that while Citigroup Global Markets made gains on short positions from the Class V collateral, other Citi affiliates retained $100 million of the notes issued by Class V and ultimately sustained losses on these positions, along with "very substantial losses the company incurred on retained long positions in other CDOs."