Citibank’s Failure to Flag Suspicious Transfers Fuels Debate Over Institutional Responsibility in Crypto Fraud

Michael Zidell, a New York resident, filed a lawsuit against Citibank after losing $20 million in a pig butchering scam, a type of romance fraud where scammers build fake online relationships to lure victims into fraudulent investments. The scam began in early 2023 when Zidell was contacted on a social media platform by someone posing as “Carolyn Parker,” who claimed to be a successful business owner.

Over time, the relationship deepened, and Parker convinced Zidell to invest in non-fungible tokens through a fraudulent platform, which later disappeared with his funds.

Why Did Citibank Fail to Detect Red Flags

Zidell’s complaint alleges that Citibank processed 12 wire transfers totaling nearly $4 million to accounts held by Guju Inc., despite multiple warning signs. The very first transfer to Guju Inc. exceeded the entity’s stated annual revenue and contradicted its account documentation, which projected monthly wires under $250,000.

The lawsuit claims that Citibank ignored these red flags and failed to implement adequate security measures or monitor the accounts for suspicious activity, allowing scammers to siphon off millions.

Did you know?
Pig butchering scams are named for the way scammers “fatten up” victims with false trust before “slaughtering” them with large financial demands. The term originates from a Chinese phrase and has become synonymous with romance-driven crypto investment fraud.

What Are the Broader Implications for Banking and Crypto Security

The case highlights growing pressure on financial institutions to strengthen their anti-fraud protocols, especially as digital asset scams become more sophisticated. The lawsuit argues that banks have a statutory duty to detect and act on suspicious transactions, particularly when large, round-number sums are involved.

The incident raises critical questions about the adequacy of current banking safeguards and the extent to which institutions should be held liable for customer losses in crypto-related fraud.

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How Does the Lawsuit Challenge Institutional Responsibility

Zidell's lawsuit accuses Citibank of negligence and complicity in the scam by neglecting flag or investigate suspicious transfers. The complaint argues that banks must do more to protect customers from increasingly complex fraud tactics involving digital assets, especially as romance and investment scams continue to proliferate.

The outcome of this case could set a precedent for institutional responsibility in the digital asset era, potentially compelling banks to adopt more rigorous monitoring and reporting mechanisms.

The $20M Scam Reflects a Rising Trend in Financial Crime

Romance scams, particularly those involving crypto investments, have surged recently with losses exceeding $5.5 billion in 2023 alone. These scams often leverage fake personas and emotional manipulation to convince victims to transfer funds to fraudulent platforms.

As digital assets gain mainstream acceptance, financial institutions must prioritize advanced fraud detection tools and customer education to mitigate these risks.