Citigroup Inc (NYSE:C) was recently sued for fraud by some of its investors and creditors of a Mexican oil firm. The firm went bankrupt and the prosecutor’s claim that they were harmed a loan scheme from the bank. The scheme was also the reason that Citigroup cut profits by $235 million and fired a dozen workers. Additionally, the company also announced that it had processed more than $1 trillion, in payments through its mobile services platforms. The services have been in use since 2011.
The Mexican oil firm, Oceanografia, collapsed in 2014, owing mainly to loans from Citigroup. The event affected the Dutch Rabobank and several other investors of the oil company. The investors lost a total of $1.1 billion, due to the Citigroup. As per the agreement between the bank and Oceanografia, the bank awarded the company short-term loans. The company did some work for the state run Pemex and in turn, Pemex repaid the bank.
The CEO of Citigroup, Michael Corbat, had stated in February 2014 that a total of $400 million in accounts receivable from Oceanografia were fraudulent. This led to an investigation with the Mexican authorities to unmask the perpetrators. Rabobank now claims that Citigroup was a part of the fraud and continued issuing loans, despite realizing that the company was dependant on these payments for its survival. An SEC probe regarding the matter is already underway.
Citigroup has been making significant progress in its mobile payment solutions, initially started in 2011. The first application to launch was targeted at corporate treasurers, which allowed them to manage payments, while providing real-time notifications. The second application was launched in 2013, targeted at treasury executives, which helped the senior executives make important decisions. Initially, the systems were mainly used in developing markets as more developed countries found the system to be unreliable. However, that has since changed.
Citigroup Inc (NYSE:C) had a trade volume of 23.76 million and gained 2.23% of its share value to reach a close at $39.48 after the February 26 session.
