Jonathan Stempel
Jan 12 (Reuters) – The U.S. Supreme Court on Monday declined to hear Citigroup’s request to avert a lawsuit accusing the bank of orchestrating a massive fraud against bankrupt Mexican oil and gas services company Oceanografia, causing losses of more than $1 billion.
The judge dismissed Citigroup’s appeal of a lower court’s May 2025 decision that revived a decade-old lawsuit by more than 30 plaintiffs, including Oceanografia bondholders, shipping lines and Rabobank. In doing so, the Supreme Court upheld the lower court’s decision.
Oceanografia provided drilling services to state-owned oil company Petroleos Mexicanos before it was seized by the Mexican government in 2014. The company declared bankruptcy two years later.
The plaintiffs allege that New York-based Citigroup’s Banamex unit advanced $3.3 billion to Oceanografia between 2008 and 2014 even though they knew the company had too much debt and forged Pemex’s signature on authorization forms.
Citigroup later discovered $430 million in fraudulent cash advances. In 2018, the U.S. Securities and Exchange Commission fined Citigroup $4.75 million over Banamex’s internal controls.
A three-judge panel on the U.S. Court of Appeals for the 11th Circuit found there were sufficient allegations that Citigroup withheld critical information about Oceanografia from plaintiffs while benefiting from interest charged on the advance payments.
The panel also said it was “implausible” that sophisticated banks such as Citigroup would not have known what Oceanografia was doing, assuming the allegations were true.
Citigroup’s appeal to the Supreme Court concerns only bondholder claims.
Citigroup said bondholders should not be allowed to bring “ordinary” securities fraud civil claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), a federal anti-racketeering law that allows treble damages.
The bank also said the Eleventh Circuit’s ruling conflicts with rulings from three other federal appeals courts.
In response, bondholders said Congress did not intend to exclude their RICO claims simply because others, such as the U.S. Securities and Exchange Commission, might make securities fraud claims.
The bondholders also said it was impossible for the private plaintiffs to bring securities fraud claims because there was no allegation that anyone relied on fraudulent statements to trade.
(Reporting by Jonathan Stempel; Editing by Will Dunham)
