Citibank Faces Lawsuit Over Alleged $20M Crypto Scam Blind Spot

Another day, another bank caught napping while crypto scams run wild. Citibank just got slapped with a lawsuit for allegedly ignoring glaring red flags in a $20 million digital asset heist—proving once again that legacy finance's 'security' measures are about as effective as a screen door on a submarine.

When Compliance Fails: The $20M Blind Spot

Plaintiffs claim Citi's fraud detection systems somehow missed a crypto scam big enough to buy a small island. The bank reportedly processed transactions with all the scrutiny of a sleepy TSA agent—letting $20 million vanish while traditional finance keeps pointing fingers at decentralized tech.

The Irony Isn't Lost

Funny how banks demand KYC for grandma's $500 check but let millions slip through when crypto's involved. Maybe those 'risky' DeFi protocols should start offering compliance workshops for the legacy players.

Wake-Up Call or Business as Usual?

Will this lawsuit finally force banks to upgrade their Stone Age systems? Or will they keep blaming crypto while fraudsters laugh all the way to—well, probably another bank.

• Crypto scams continue to rise, with Citibank facing a lawsuit over its role in a $20 million fraudulent scheme.
• Zidell accuses Citibank of failing to act on red flags, allowing scammers to steal millions through its accounts.
• The lawsuit highlights growing concerns over banks’ responsibility in preventing financial fraud in the crypto space.

Crypto-related frauds continue to skyrocket, and a $20 million crypto scam involving a major bank, Citibank, is currently the subject of a lawsuit. The plaintiff, Michael Zidell, accuses the bank of neglecting warning signs and letting the scammers use millions of dollars through their accounts. Zidell claims that by not taking action, Citibank enabled theft of huge amounts of money by fraudsters.

In the Manhattan federal court, Zidell accused Citibank of performing multiple suspicious transactions, among which nearly $4 million was transferred to accounts related to the scam. The fraud, also referred to as pig butchering, started at the beginning of 2023 when Zidell was approached through Facebook by a woman named Carolyn Parker. Parker, posing as a successful business person, developed a love affair with Zidell. She convinced him to invest in non-fungible tokens (NFTs), saying she had earned millions and sending him to a trading network.

Source: CourtListener

Red Flags Ignored by the Bank

Zidell took Parker’s advice and started transferring money. In several months, he completed 43 transactions, exceeding $20 million. Almost $4 million of this was transferred to Citibank accounts associated with a business name, Guju Inc. Zidell was instructed to transact through different banks in order to cover the volume of deposits, which he had done. Later in April, though, the trading site went away, along with his funds.

In their suit, Zidell alleges that Citibank overlooked a lot of red flags in transferring these funds. He claims that he should have suspected the huge and circular amount of money. According to Zidell, the failure of Citibank to inquire about these transactions further led to his loss.

Zidell is now alleging the bank of negligence, implying that Citibank was under a legal obligation to monitor and identify acts of suspicious activity in customer accounts. In his opinion, the fact that the bank failed to respond to these warning signs represented a plain breach of duty. The case of Zidell reveals the increased interest in the role of financial institutions in the prevention of fraud in crypto.

Crypto Scams Surge in 2024

The lawsuit emerges as crypto scams are on the rise. Last year, cybersecurity firm Cyvers reported losses of more than $5.5 billion due to romance scams alone. Chainalysis predicts that the total amount of potential losses in crypto scams as of 2024 will reach up to $12.4 billion.

Source: Cyvers

The case of Zidell is part of a larger trend to hold financial institutions accountable for fraud related to cryptocurrency. Later this year, U.S. officials will conduct one of the biggest crypto fraud busts of all time, with $225 million seized, and that was related to pig butchering schemes. The case brought by Zidell highlights important issues regarding the role banks play in curbing such scams.