Supreme Court Allows Citigroup Lawsuit Over Mexican Oil Fraud to Proceed
The U.S. Supreme Court has declined to hear Citigroup's appeal in a major lawsuit accusing the bank of orchestrating fraud that caused more than $1 billion in losses at a bankrupt Mexican oil services company. The decision, issued Monday, leaves intact a lower court ruling that revived the decade-old case brought by more than 30 plaintiffs including Oceanografia bondholders and Netherlands-based Rabobank.
Background and Context
The case centers on Oceanografia, a Mexican oil and gas services company that provided drilling services to Petróleos Mexicanos (Pemex), Mexico's state-owned oil company. The company was seized by Mexican authorities in 2014 and declared bankrupt in 2016 after revelations of massive financial fraud.
According to court documents, Citigroup's Banamex unit advanced $3.3 billion to Oceanografia between 2008 and 2014, despite allegedly knowing the company had excessive debt and had forged Pemex signatures on authorization forms. Citigroup later uncovered $430 million in fraudulent cash advances.
The U.S. Securities and Exchange Commission fined Citigroup $4.75 million in 2018 over Banamex's internal controls failures related to the Oceanografia matter.
Key Figures and Entities
Citigroup, the New York-based banking giant, appealed to the Supreme Court after the 11th U.S. Circuit Court of Appeals found sufficient allegations that the bank withheld critical information about Oceanografia while benefiting from interest payments on the advances. The appellate court noted that "it strains credulity" that a sophisticated bank like Citigroup would not have been aware of Oceanografia's activities.
The plaintiffs include Oceanografia bondholders, shipping companies, and Rabobank, the Dutch banking group. Their lawsuit alleges violations under the Racketeer Influenced and Corrupt Organizations Act (RICO), a federal anti-racketeering law that allows for triple damages.
Legal and Financial Mechanisms
The Supreme Court's decision focused specifically on whether bondholders could pursue securities fraud civil claims under RICO. Citigroup argued these were "garden-variety" securities claims and that the 11th Circuit's decision conflicted with rulings from three other federal appeals courts.
Bondholders countered that Congress did not intend to preclude their RICO claims simply because regulatory bodies like the SEC might pursue separate securities fraud actions. They noted that no private plaintiff could bring traditional securities fraud claims because there was no allegation that anyone traded securities in reliance on fraudulent statements.
The RICO statute's triple damages provision makes the litigation particularly significant for Citigroup, with potential financial exposure exceeding the original $1 billion in losses claimed by plaintiffs.
International Implications and Policy Response
The Oceanografia case highlights ongoing challenges in cross-border banking regulation and fraud detection, particularly involving subsidiaries operating in emerging markets. The failure of internal controls at Banamex, Citigroup's Mexican subsidiary, contributed to significant financial losses for international investors.
Regulatory responses have included increased scrutiny of multinational banking operations and enhanced requirements for monitoring transactions with government-connected entities in foreign jurisdictions. The case has also prompted discussions about the appropriate use of RICO statutes in complex financial fraud cases involving multiple jurisdictions.
Sources
This report draws on court filings from the 11th U.S. Circuit Court of Appeals, U.S. Securities and Exchange Commission enforcement actions, and reporting by Reuters. Additional information was obtained from corporate disclosures and regulatory documents filed between 2014 and 2025.
