Citibank is facing legal action after allegedly failing to detect and prevent a \$20 million cryptocurrency romance scam, according to recent reports. The lawsuit, filed in a Manhattan federal court, accuses the bank of ignoring red flags that allowed scammers to steal millions from a Texas man named Michael Zidell.
Zidell claims that Citibank neglected its statutory duties and obligations by allowing him to deposit millions of dollars into accounts held by the scammers. He alleges that he transferred \$20 million through numerous transactions across various banks, with nearly \$4 million ending up in Citibank accounts.
The scheme began in early 2023 when Zidell was contacted on Facebook by someone using the name "Carolyn Parker." This individual, posing as a business owner, cultivated a friendly and later romantic relationship with Zidell. After a month, "Parker" persuaded Zidell to invest in non-fungible tokens (NFTs), claiming to have made millions through this investment strategy. Lured by the prospect of high returns, Zidell began transferring funds to various bank accounts provided by the trading platform recommended by "Parker". He was informed that using multiple banks was necessary due to the high volume of customer deposits.
Over the next few months, Zidell made 43 transfers totaling over \$20 million to different accounts. However, in late April, the trading platform's website disappeared, and with it, Zidell's investments. The lawsuit specifically accuses Citibank of processing 12 transfers amounting to approximately \$4 million to a company named Guju Inc. It alleges that the bank ignored "red flags" associated with Guju's accounts, such as large, round-sum transactions, which should have prompted an investigation into suspicious activity. Zidell claims that Citibank failed to implement adequate security measures and detect suspicious transactions, ultimately enabling the scammers to abscond with his money.
This type of scam, often called "pig butchering," involves scammers creating fake personas to establish online relationships with victims, enticing them into fraudulent investment schemes. The fraudster gains the victim's trust over time before introducing the investment opportunity. They may offer advice on how to make money quickly through crypto trading or promise high returns on investments, pressuring the victim to send money, typically in cryptocurrency, to invest or to "help" with an urgent situation. Once the victim has invested, the scammer may ask for more money to unlock "additional profits" or "withdrawals," continuing the cycle until the victim's funds are drained. Scammers often use fake websites, manipulated testimonials, and fabricated crypto platforms to deceive victims, making it hard to discern their legitimacy.
The rise of cryptocurrency and online dating has created new opportunities for scammers to exploit people's emotions and finances. Cryptocurrency romance scams are on the rise, causing severe financial losses, emotional harm, and lasting consequences for victims.
Citibank has yet to release an official statement addressing the allegations. The case is ongoing, and the outcome could have significant implications for how banks handle and monitor transactions related to cryptocurrency investments, especially in the context of online romance scams.
