A New York federal court judge has rejected Citigroup's $285 million settlement with the Securities and Exchange Commission, with which the bank had hoped to dispose of a massive lawsuit claiming it misled investors in mortgage-backed securities to the tune of $1 billion. U.S. District Judge Jed Rakoff told the two sides to prepare for a court case, according to a tweet from The New York Times' Peter Lattman. Financial blogger Tyler Durdin wrote on Zero Hedge that the ruling was a "slap in the face" for both Citigroup and the SEC, which he said was a "complicit enabler" in Citigroup's misleading investors as to the safety of mortgage-backed securities. "The Court concludes, regretfully, that the proposed Consent Judgment is neither fair, nor reasonable, nor adequate, nor in the public interest," Rakoff wrote, according to Zero Hedge. Bloomberg has a further quote from the opinion: "In any case like this that touches on the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives, there is an overriding public interest in knowing the truth." The parties can try for a revised settlement before they must go to court, but it would have to be approved by Rakoff, and based on his comments, he doesn't appear to be in any mood to cooperate.