Citigroup will pay over half a billion dollars back to investors, after a New York federal judge rubberstamped the settlement deal, which is related to the bank hiding toxic mortgage assets.

US District Judge Sidney Stein approved $590m (€445.2m, £388.9m) to be returned to investors, who accused Citi of hiding billions of dollars in toxic financial products. The settlement also led to a $25m slash in fees awarded to lead counsel Kirby Mclnerney LLP.

"Although the $590 million recovery is a fraction of the damages that might have been won at trial, it is substantial and reasonable in light of the risks faced if the action proceeded to trial," said Stein in Manhattan in a 48-page court document.

The Lawsuit

The settlement resolves claims by shareholders who bought Citigroup shares from February 2007 to April 2008. Investors claimed that the bank misrepresented its exposure to securities called collateralised debt obligations which were attached to risky mortgage investments.

These products have been blamed for the financial crisis of 2008.

That year, the New York-based bank lost $27.68bn. The lawsuit also included the push in the company's stock price which was from $47.89 at the start of the fourth quarter of 2007 to $2.80 by January 2009.

Federal judge Stein, had previously doubted the fairness of the settlement.

The complainants lawyers will now receive $73.6m instead of the previously pursued $100.2m.

While Stein said the lawyers "undoubtedly secured an impressive recovery" for Citigroup investors, their request was based on "significantly overstated" metrics. The settlement was announced in last August.

Earlier in April it was reported that a US judge refused to give the green light on Citigroup's proposed $590m settlement after questioning the fairness of the legal fees and settlement allocation.

The lawsuit was originally filed on 8 November 2007 by a number of former employees and directors of Automated Trading Desk, a company that was bought by Citigroup in October 2007 for about $680m.