Jan. 4 (Bloomberg) -- Citigroup Inc.’s Singapore unit sued Hong Kong-based hedge fund manager Raghavendran Rajaraman, seeking to recoup $1.03 million in trading losses the bank says he incurred after gold fell from a record high in September.

Rajaraman had $19.2 million worth of gold in his account on Sept. 23 which the bank sold, along with other collateral, on Sept. 26 “in the face of a rapidly deteriorating market,” leaving a $1 million shortfall, according to a Nov. 18 lawsuit filed with the Singapore High Court. The first closed hearing is scheduled for Jan. 27.

Gold plunged 11 percent in September, the most since October 2008, after futures reached a record $1,923.70 an ounce on Sept. 6. The bank liquidated Rajaraman’s account after it reached a so-called forced sell level and got his authorization, according to court papers. Gold for February delivery in New York was at $1601.30 an ounce at 9:55 a.m. Singapore time.

Rajaraman works with hedge fund 3 Degrees Asset Management and was a currency options trader with Citigroup in Singapore until 2007, according to the lawsuit.

He hasn’t filed his defense and didn’t return three calls to his mobile-phone. Richard Healy, Rajaraman’s lawyer at Oldham, Li & Nie, declined to comment.

“We intend to pursue the case and it’s inappropriate for us to comment further,” said Citigroup’s Singapore-based spokesman Adam Abdur Rahman.

3 Degrees Plan

Rajaraman isn’t a 3 Degrees employee, Moe Ibrahim, founder of the hedge fund, said in a phone interview. “There was a plan to launch a fund together but it never came to fruition,” Ibrahim said.

Citigroup breached its agreement by closing his account without prior notice, according to an Oct. 7 letter from Oldham, Li & Nie to the bank’s lawyers including William Ong at Allen & Gledhill LLP.

“As a direct consequence of the bank’s breach,” Rajaraman suffered a $1.7 million loss, representing his collateral, according to the letter. He incurred a further $1.03 million loss as the bank prematurely liquidated the account instead of waiting for 24 hours after the account reached the force-sell level, Rajaraman’s lawyers said in the letter.

The case is Citibank Singapore Ltd. v Raghavendran Rajaraman S826/2011 in the Singapore High Court.

--Editors: Douglas Wong, Joe Schneider

To contact the reporter on this story: Andrea Tan in Singapore at atan17@bloomberg.net

To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net