Citibank Sued for $20 Million Crypto Fraud Failure

Citibank is currently facing a lawsuit from an investor who alleges that the bank failed to detect and prevent fraudulent cryptocurrency transfers, resulting in a loss of $20 million. The lawsuit, filed in New York, claims that Citibank processed 12 wire transfers totaling approximately $4 million to a company named Guju Inc., despite numerous red flags that should have alerted the bank to the suspicious nature of the transactions.

The scam began in early 2023 when the investor, Michael Zidell, was contacted on Facebook by an individual claiming to be a businesswoman. The two developed a relationship over time, and by February 2023, the scammer encouraged Zidell to invest in non-fungible tokens (NFTs) on a specific trading platform, claiming to have earned millions herself. Zidell began transferring funds to accounts specified on the website, believing these transfers were funding his NFT investments.

Zidell made 43 separate wire transfers over several months, totaling more than $20 million and involving several banks. Of that amount, 12 transfers worth $4 million passed through Citibank. The funds were sent to an entity named Guju Inc. The lawsuit alleges that Citibank ignored several warning signs, including unusually large and round-numbered transactions that were inconsistent with Guju Inc.’s declared business activity. The first transfer to Guju Inc. alone exceeded the entity’s stated annual revenue and contradicted its account documents, which projected monthly wires under $250,000. Despite these clear indicators of suspicious activity, Citibank allegedly failed to investigate Guju Inc. or fulfill its Know Your Customer (KYC) and Anti-Money Laundering (AML) obligations.

This type of scam, known as "pig butchering," involves scammers first gaining the trust of their victims through fake romantic relationships before financially exploiting them. The scam ranked among the worst crypto crimes last year, with investment fraud losses reaching $5.8 billion. Older Americans were particularly affected, losing $2.8 billion to crypto scams alone.

Zidell's lawsuit seeks compensation and legal costs, arguing that Citibank's negligence enabled the massive fraud. The case raises critical questions about the responsibility of banks in spotting and preventing fraudulent activities. As of now, Zidell is fighting for accountability and justice for his catastrophic loss, serving as a stark warning in the digital age about the dangers of online scams and the importance of vigilance in financial transactions.

Romance crypto scams are on the rise, with victims losing over $5.5 billion last year in over 200,000 incidents. Earlier this month, U.S. authorities announced a large crypto seizure linked to similar frauds. The U.S. Secret Service recovered $225 million in stolen Tether (USDT). Investigators linked the funds to criminal operations in Southeast Asia. These scams often involve trafficked individuals forced to take part. U.S. agencies are working with crypto firms to track and recover stolen assets.