Maybe the SEC hasn’t done a better job of policing Wall Street and protecting investors from fraud because the SEC itself is a fraud:

A federal judge Wednesday challenged the SEC’s plan to settle a fraud case against Citigroup for $285 million, saying that the deal would recoup only a fraction of investors’ losses and would leave the firm free to proclaim its innocence in private lawsuits over the remaining damages.

The judge used the Citigroup case to mock the SEC’s traditional way of doing business — allowing defendants to settle without admitting or denying wrongdoing.

The unproven allegations, U.S. District Court Judge Jed S. Rakoff said, “are no better than rumor or gossip.”

“Does not the SEC of all agencies have an interest in establishing what the truth is?” Rakoff asked.

It was the third case since the financial meltdown of 2008 in which Rakoff sharply questioned the value of enforcement actions brought by the Securities and Exchange Commission, which is responsible for policing Wall Street and protecting investors.

Citigroup is accused of misleading investors about a 2007 transaction tied to the deteriorating housing market in which the firm bet against its customers and made profits of $160 million while the customers lost more than $700 million.

Matt Taibbi took a look at the numbers and came up with a fitting analogy:

Rakoff of course is right – the settlement is nuts. If you take Citi’s $160 million profit on the deal into consideration, what we’re talking about then is a $125 million fine for causing $700 million in damages. That, and no admission of wrongdoing.

Just imagine a mugger who steals $70 from some lady’s wallet being sentenced to walk free after paying back twelve bucks. Magritte himself could not devise a more surreal take on criminal justice.