In a historic blow to the big banks, a federal judge this week issued a landmark decision by shutting down Citigroup Inc’s offer of settling Securities and Exchange Commission complaints with a measly $285 million.

The SEC and Citigroup stood to cut a deal that would keep the banking giant from admitting that they defrauded investors in the financial scandal that helped cause the great recession of three years earlier. U.S. District Judge Jed Rakoff rejected Citigroup’s proposed $285 settlement, however, dismissing the offer as "pocket change to any entity as large” as them.

“The court has not been provided with any proven or admitted facts upon which to exercise even a modest degree of independent judgment,” Rakoff says in his opinion, offered Monday this week.

Additionally, Rakoff wants Citigroup to admit wrongdoing. Rather than avoiding legal accountability by buying their way out of the SEC complaint, Rakoff is pressing for the bank to bury its tail between its legs and admit to illegal practices.

The Commission had lobbied that Citigroup has misled its clients to the tune of around $1 billion in collaterized debt obligation tied to the failing housing market around 2008. In many instances, the SEC allows the larger of institutions to settle out of court, instead insisting on a slap on the wrist. Judge Rakoff’s move, however, could force not just Citigroup to accept accountability but could also set a precedent that would impact other banks to not buy their way out of crashing the economy.

"Judge Rakoff is an extremely intelligent and well respected judge and therefore any judge would read what he's written," attorney Marty Perschetz from the Schulte, Roth & Zabel first tells the Los Angeles Times.

Rakoff adds that a mere $285 billion is could be considered just the “cost of doing business” among Wall Street bigwigs, so Citigroup should not expect to get out of dodge so easily. The New York Times reports that the bank made $160 million in profits from lying to investors, who came up around $700 million short in the scam.

For Citigroup, the ruling is far from just.

“The proposed settlement is a fair and reasonable resolution to the SEC’s allegation of negligence,” spokeswoman Danielle Romero-Apsilos said Monday in a statement to Bloomberg News. “The settlement fully complies with long-established legal standards. In the event the case is tried, we would present substantial factual and legal defenses to the charges.”

Regardless of their defense, Judge Rakoff believes that his ruling put him in the right.

"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,"says the judge.

Lest Rakoff and Citigroup can come to a compromise, the bank is expected to go to trial come July 2012.