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In one of the largest settlements of suits tied to the financial crisis, Citigroup Inc. C -0.78% agreed to pay $590 million over claims that it deceived investors by hiding the extent of its dealings in toxic subprime debt.

The pact, with investors who purchased Citigroup stock in parts of 2007 and 2008, represents the latest effort by Citigroup Chief Executive Vikram Pandit to put the pain from the financial crisis behind it.

Citigroup denied the allegation, saying it is settling "solely to eliminate the uncertainties, burden and expense of further protracted litigation." It said existing legal reserves will cover the cost of the settlement.

The Citigroup case was particularly high profile, because of the size of the company's bailout, the seriousness of the accusations and the prominence of the company's board.

The complaint filed in federal court in Manhattan alleged that an underwriting spree at the height of the housing boom left Citigroup in 2007 with far more unmarketable securities known as collateralized debt obligations, or CDOs, on its balance sheet than it had disclosed to investors.

The allegations are similar to those brought by the Securities and Exchange Commission, which in 2010 charged Citigroup with misleading investors about the company's exposure to subprime mortgage-related assets.

Citigroup paid a $75 million penalty, and a former chief financial officer and former head of investor relations paid $100,000 and $80,000 respectively over their roles in Citigroup understating its exposure to subprime mortgages by more than $37 billion.

Wednesday's agreement is the largest legal settlement tied to financial-crisis dealings in CDOs, and the third-largest settlement of a class-action lawsuit tied to the financial crisis, according to Jeff Nielsen, a managing director of Navigant Consulting, a Washington-based banking-related consulting firm. http://online.wsj.com/article/SB10000872396390444914904577619410325528
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