Germany’s financial regulator BaFin found Citigroup guilty of market manipulation referring the case of the group’s bond trade in August 2004 to the public criminal prosecutor in Frankfurt, which could potentially lead to a fine or imprisonment for Citigroup officials.

"We have passed on the case to the public prosecutor. There are indications that market manipulation took place in connection with Citigroup’s bond trade. The market manipulation took place on Eurex," said Sabine Reimer, BaFin’s spokeswoman for.

Yesterday, Citigroup spokesman Daniel Noonan said, "We are disappointed that the BaFin has referred to the prosecutor the question of whether action should be brought against individuals involved in the MTS matter. We will continue to cooperate fully with all authorities reviewing this matter."

The scandal concerns the placement by Citigroup of €11 billion ($14.36 billion) of sell orders on bonds that triggered a fall in euro-zone government bonds, and resulted in market disruption.