Citigroup Faces Revived $1B Fraud Lawsuit Over Oceanografía Dealings

Citigroup Inc. is once again facing scrutiny in a long-running legal battle over its alleged involvement in a $1 billion fraud connected to the now-defunct Mexican oil and gas company, Oceanografía S.A. de C.V. On May 8, 2025, the U.S. Court of Appeals for the Eleventh Circuit overturned a prior dismissal and ruled that plaintiffs—including creditors, bondholders, and vendors of Oceanografía—presented sufficient allegations to move forward with their case.

According to the plaintiffs, Citigroup’s Mexican banking unit, Banamex, facilitated more than $3.3 billion in cash advances to Oceanografía between 2008 and 2014. These advances were purportedly backed by accounts receivable from Mexico’s state-owned oil firm, Pemex. However, the plaintiffs allege that Citigroup knowingly ignored Oceanografía’s deteriorating financial condition and its routine use of falsified Pemex documents to secure financing. The appellate court determined that these claims plausibly show that Citigroup substantially assisted and concealed the fraudulent scheme.

What Happened Inside Banamex

At the center of the lawsuit is Citigroup’s Banamex unit, which had an established relationship with Oceanografía, advancing funds based on expected payments from Pemex. In 2014, Citigroup disclosed it had uncovered nearly $430 million in fraudulent loans issued to Oceanografía through Banamex. This revelation prompted regulatory scrutiny and led to multiple internal consequences. The bank terminated 12 employees in connection with the fraud, and Mexican authorities found that 10 individuals affiliated with Banamex bore criminal liability under Mexican law.

The U.S. Securities and Exchange Commission subsequently fined Citigroup $4.75 million in 2018 for failing to maintain adequate internal controls related to these transactions. Plaintiffs now argue that Citigroup’s failure to act sooner, despite numerous red flags, allowed the fraud to continue unchecked for years—inflicting substantial losses on creditors and investors tied to Oceanografía.

The Court’s Analysis

In an 82-page decision authored by Circuit Judge Britt Grant, the Eleventh Circuit found that Citigroup’s role extended beyond mere negligence. The court held that plaintiffs plausibly alleged that Citigroup had both the knowledge and the financial incentive to keep the fraudulent scheme operational. As Judge Grant observed, “Citigroup is one of the world’s most sophisticated financial institutions, and it strains credulity to conclude that, assuming the plaintiffs’ allegations are true, Citigroup lacked awareness of [Oceanografía’s] activities.”

The court emphasized that Citigroup had a direct financial stake in continuing to advance funds to Oceanografía, benefiting from the interest payments generated by the loans. Furthermore, the court found that Citigroup allegedly concealed critical information about Oceanografía’s financial status from stakeholders who relied on the bank’s representations. This concealment, coupled with its involvement in facilitating the financing, was sufficient to reinstate the case at the trial court level.

What's Next?

With the appellate court’s ruling, the case has been remanded to U.S. District Judge Darrin Gayles in Miami, who previously dismissed the action in August 2023. The revived lawsuit, Otto Candies LLC et al. v. Citigroup Inc., No. 23-13152, will now proceed to discovery and potentially trial, allowing the plaintiffs to substantiate their allegations that Citigroup played a knowing and active role in enabling the Oceanografía fraud.

Citigroup has declined to comment on the decision. However, plaintiffs’ counsel, Juan Morillo, noted that his clients were “gratified” by the court’s ruling, which breathes new life into a case that has been pending for nearly a decade.

The Law Firms Involved

The plaintiffs are represented by attorneys including Juan Morillo. Citigroup is likely to rely on its longstanding corporate defense counsel in continuing to contest the claims. At the time of publication, no law firm representing Citigroup in this matter had publicly commented on the latest development.

Law Firm Involved:

• Quinn Emanuel Urquhart & Sullivan LLP
• Covington & Burling LLP

As the litigation resumes, the case could serve as a pivotal test of how far courts are willing to hold financial institutions accountable for their roles in large-scale corporate frauds, especially when they allegedly benefit from the wrongdoing they are accused of facilitating.