Citigroup is set to face a revived lawsuit alleging its role in a fraud at the now-bankrupt Mexican oil and gas services company Oceanografia, which led to more than $1bn (19.51bn pesos) in losses.
The 11th US Circuit Court of Appeals in Miami has ruled that the case, previously dismissed, holds merit and Citigroup may have substantially aided the fraudulent activities, according to a report by Reuters.
A panel of three judges found that the plaintiffs, including vendors, creditors and bondholders, presented adequate allegations against Citigroup.
The financial giant’s Banamex unit had been providing cash advances to Oceanografia, which worked closely with Mexico’s state-owned oil company Pemex, and collected interest on these advances.
Citigroup spokeswoman Danielle Romero-Apsilos declined to comment on the court’s decision.
However, Juan Morillo, representing the plaintiffs, expressed their gratification regarding the revival of the lawsuit.
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By GlobalDataThe plaintiffs, which comprise shipping and leasing companies, investment funds and Rabobank, have accused Citigroup of advancing $3.3bn to Oceanografia between 2008 and 2014, despite clear signs of the company’s excessive debt and fraudulent activities.
According to the report, Citigroup had discovered nearly $430m in fraudulent cash advances and was subsequently fined $4.75m by the US Securities and Exchange Commission in 2018 for inadequate internal controls at Banamex.
Former Citigroup CEO Michael Corbat acknowledged the dismissal of 12 employees due to the scandal, while Mexican regulators found ten bank employees criminally liable.
Circuit Judge Britt Grant, in an 82-page decision, pointed out that Citigroup allegedly withheld crucial information from the plaintiffs and was likely aware of Oceanografia’s fraudulent conduct, given the financial institution’s sophistication.
The case has been sent back to US District Judge Darrin Gayles in Miami, who had dismissed it in August 2023. The case is Otto Candies LLC et al v Citigroup Inc, 11th US Circuit Court of Appeals, No. 23-13152.
