- 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
Also Read: Massive $50M Crypto Scam Exposed Involving SUI and NEAR Tokens
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.
Also Read: $27 Billion Crypto Scam Empire Huione Has Been Dismantled By Telegram