The SEC won a delay in its securities fraud lawsuit against Citigroup, in its effort to appeal Judge Jed Rakoff's decision to reject the $285 million settlement with the bank.  The 2nd U.S. Circuit Court of Appeals in New York granted the delay just 78 seconds before U.S. District Judge Rakoff issued his own ruling opposing any delay in the SEC-Citigroup securities fraud case. And so, the case now is on hold until a motions panel convenes on 1/17/12 to begin considering the SEC's bid for a longer delay so it can pursue an expedited appeal.  Citigroup supported the SEC's request for a delay. The SEC has grave concerns that Judge Rakoff's rejection of the SEC-Citi settlement could lead to "irreparable harm" if the regulator ultimately can no longer settle enforcement cases without requiring corporate defendants to admit they did anything wrong. That practice was called into question by Judge Rakoff on 11/28, when he harshly rejected the proposed settlement with Citigroup, saying the SEC's failure to require Citigroup to admit or deny its charges left him no way to know whether the settlement was fair.  Rakoff further called the $285 million payout "pocket change" for the third-largest U.S. bank. But the SEC said that ruling was "legal error," at odds with decades of court decisions allowing such settlements and letting investors get faster recoveries, and could affect its ability to reach similar accords with other companies. The October 19 settlement was intended to resolve charges that Citigroup sold $1 billion of risky mortgage-linked securities in 2007 without telling investors that it was betting against the debt, and caused more than $700 million of losses.  Citigroup's $285 million payment was to include $160 million of disgorged profit and fees, $30 million of interest and a $95 million civil fine. Irreparable Harm, or Illusory Harm? In a filing on Tuesday morning with the 2nd Circuit, the SEC said the urgency to put the case on hold came after Rakoff in a teleconference this month told Citigroup to answer the charges by 1/3/12 - or 27 days sooner than federal rules require.  An answer can force Citigroup to deny some or all of the SEC allegations, or seek to dismiss the case entirely. The motions panel may choose to follow or not follow Judge Rakoff's decision issued on Tuesday, in which he said it is "patently clear" there was no statutory basis to appeal his November 28 ruling, and "derail the orderly conduct" of the case.  The Judge said this was because the appeal focused on his alleged error in demanding more facts about the case, rather than on the injunctive relief provided by the settlement. He further claimed the alleged harm faced by the SEC was "largely illusory" because the regulator is pursuing a related case arising out of the same facts against a Citigroup employee, director Brian Stoker, who contests the regulator's charges.  Rakoff had set a 7/16/12 trial date. The cases are:  SEC v Citigroup Global Markets Inc, 2nd U.S. Circuit Court of Appeals, No. 11-05227; and U.S. District Court, Southern District of New York, No. 11-07387. [Reuters, 12/27/11]