NEW YORK - A U.S. judge on Friday dismissed a lawsuit against Citigroup Inc brought by buyers of auction rate securities, a $330 billion market that collapsed in early 2008.

Five consolidated putative class action lawsuits were included in the ruling by Manhattan federal court Judge Laura Taylor Swain who granted Citigroup's application for dismissal on grounds plaintiffs could not prove a claim for fraud or market manipulation.

The investors bought the Citigroup auction rate securities (ARS) between Aug. 1, 2007 and Feb. 11, 2008.

The $330 billion market for mortgage-backed ARS (debt reset at periodic auctions by Wall Street firms that had touted it as a safe, cash equivalent) collapsed in February 2008. Several investigations have led to settlements in which banks and firms paid back investors.

Defendants regularly and increasingly intervened throughout the class period in order to prevent failed auctions, the judge's written ruling said. Defendants' increasing intervention into the auctions was unknown to Plaintiff and purported class members.

A lawyer for the lead plaintiff could not be reached for comment.

We are pleased with the court's decision in this matter, a Citigroup spokesman said.

On Thursday, the same judge dismissed a lawsuit by the Louisiana Municipal Police Employees Retirement System against Citigroup Inc's (C.N) Chief Executive Officer Vikram Pandit and other executives over claims they manipulated the ARS market.

In both rulings, she gave the plaintiffs until Oct. 1 to file an amended complaint, but failure to do so would result in a judgment.

The case is In Re: Citigroup Auction Rate Securities Litigation 08-3095 in U.S. District Court for the Southern District of New York (Manhattan) (Reporting by Grant McCool; editing by Carol Bishopric)

Investment U.S. Lawsuit Citigroup