In a sealed complaint filed last month with an employment tribunal, John Pickett, who ran a hedge fund known as CSO Partners that specialised in corporate debt, accuses the bank of pressuring CSO to buy billions of dollars in troubled loans.

Mr Pickett said the loans undermined CSO and led to his resignation. Citi called the complaint "without merit," the WSJ said.

The dispute, which seeks unspecified damages from Citi for allegedly wrongfully forcing out Mr Pickett, centres on the hedge-fund manager's bid last summer for a big package of loans. Mr Pickett, who was based in London, tried to back out, saying that the loan terms had changed, making them less attractive.

The issue, while it applies to a hedge fund, underlines the risk that wealth managers and other financial players may be sued for disappointing investment performance in the current market turmoil.