Citibank Faces Legal Battle: NY Attorney General's Fraud Reimbursement Lawsuit Proceeds

A federal judge has rejected Citigroup's attempt to dismiss a lawsuit filed by New York Attorney General Letitia James, accusing Citibank of failing to reimburse customers victimized by online scammers. The lawsuit claims Citibank violated federal law regarding unauthorized wire transfers but saw some claims dismissed due to federal preemption.

In a significant legal setback for Citigroup, a federal judge has ruled that the corporation must confront allegations made by New York Attorney General Letitia James. The lawsuit centers around Citibank's alleged failure to reimburse customers who fell prey to online scams, an accusation that the U.S. District Judge Paul Oetken in Manhattan ruled on Tuesday must proceed.

The allegations against Citibank include violations of federal laws concerning unauthorized wire transfers, exacerbated by security system shortcomings. These alleged shortcomings include failures to probe suspicious activities like unrecognized devices or altered user credentials that reportedly enabled scams siphoning off millions from innocent customers.

Some parts of the lawsuit were dismissed by the court, citing federal preemption. Despite this, the core allegations regarding the lapses in Citibank's security measures underscore the bank's continued legal challenges as they respond to the accusations under intense scrutiny.

(With inputs from agencies.)