In a stunning legal twist, Citigroup must face a $1 billion lawsuit accusing the Wall Street titan of playing a central role in a massive fraud scheme tied to a now-defunct Mexican oil services company. The decision, handed down Thursday by a three-judge panel from the 11th U.S. Circuit Court of Appeals, revives a long-dormant legal powder keg that could send tremors through the global banking world.
At the heart of the revived suit are claims that Citigroup’s Banamex unit enabled and concealed rampant fraud at Oceanografía, a drilling contractor for Mexico’s state oil firm, Pemex. Plaintiffs—ranging from bondholders and leasing firms to international creditors—allege that Citigroup knowingly funneled $3.3 billion to Oceanografía between 2008 and 2014, despite glaring red flags including forged Pemex signatures and ballooning debt, reports agencies.
The appeals court determined that the plaintiffs presented a compelling case that Citigroup substantially aided the fraud and withheld critical information that could have prevented more than $1 billion in damages.