The SEC said the "fraudulently-induced loans" to Oceanografia that led to $475 million in losses were the result of inadequate controls that prevented them from registering "numerous red flags" in the borrower's documents. Similarly, it said that inadequate supervision allowed the CGMI traders to mismark illiquid positions and cover up $81 million in losses.

Citigroup and CGMI settled the allegations without admitting or denying the SEC's findings.

(This version of the story corrects day of week to Thursday from Wednesday in first paragraph)

(Reporting by Lisa Lambert; Editing by Chizu Nomiyama)