In times of economic instability—whether here domestically or in foreign countries—fraudsters often pounce. They lure unwitting victims into wiring substantial sums of money—sadly, in some cases the life savings of the victims—into accounts under their control. And, sometimes, that’s just where the scheme begins. In the classic Ponzi scheme scenario, they’ll string the victims along, using portions of it to re-pay prior investors so that the scheme can continue).
What do you do if you, a loved one, or a friend has been scammed like this? While suing the fraudster is one option, by the time the scheme comes to light, the money is often long gone. That’s where the tort of aiding-and-abetting fraud comes into play. In certain instances, the U.S. bank that the fraudster used as a platform to commit his fraud can be liable for the damage caused to victims.
To prove a claim of aiding-and-abetting fraud under Florida law, a plaintiff must prove (1) there was an underlying fraud; (2) the defendant bank knew about the fraud; and (3) the defendant bank substantially assisted the fraud. In many cases, claims against banks stumble on the “knowledge” element. In short, it’s not enough that the bank should have known about the fraud (for example, because of red flags like the fraudster’s “atypical” banking activity). Actual knowledge is required.
Critically, though, the Eleventh Circuit recently made clear that, at the pleading stage, a plaintiff only needs to plead actual knowledge generally. In other words, he or she need only allege facts sufficient to allow a court to draw the inference that the defendant knew about the fraud.
The case—Otto Candies, LLC v. Citigroup Inc., No. 23-13152, 2025 WL 1337052, at *1 (11th Cir. May 8, 2025)—merits brief discussion. The case involved a fraud carried out by a Mexican oil and gas service company called Oceanografia. The company carried out the fraud with the aid of Citigroup, Inc., with Citigroup advancing the company millions of dollars that gave the company the appearance of being a solvent, reliable company. The district court granted Citigroup’s motion to dismiss, holding, among other things, that the plaintiffs had failed to sufficiently plead knowledge.
The Eleventh Circuit reversed and remanded the case. Expressly stating that it was seeking to “clarify” the standard for pleading the knowledge element of an aiding-and-abetting fraud claim, the court stressed that lower courts shouldn’t require plaintiffs to meet the stringent knowledge standard required in securities fraud cases. As the court reasoned, “a plaintiff rarely will be able to plead a defendant’s actual state of mind—particularly before it has access to discovery.”
Ultimately, the court held that the plaintiffs in the case had alleged facts sufficient to plead knowledge, including the following facts:
- Citigroup had violated internal control procedures;
- Citigroup’s CEO had acknowledged it had fired an employee it “believe[d] was directly involved in the fraud”;
- Mexican authorities brought criminal charges against multiple Citigroup employees;
- Citigroup had access to financial data that, on its face, showed a massive gulf between the cash advances sought by the fraudster company and the amounts that would have been justified by the company’s government contracts.
The Eleventh Circuit’s decision is helpful in two ways. First, it makes clear that the standard for pleading the knowledge element of an aiding-and-abetting fraud claim under Florida law is not as stringent as many district courts had interpreted it to be. And second, it reminds plaintiffs to be on the lookout for facts that would allow a court to infer the defendant bank knew about the fraud.
In that spirit, when investigating an aiding-and-abetting fraud claim, consider asking the following:
- Did the bank employ unusual procedures when handling the fraudster’s accounts?
- Did the bank bypass certain internal control procedures, including so-called KYC—”know your customer”—policies?
- Did the fraudster have a particular bank employee that he routinely worked with or who “vouched” for the fraudster?
- Was the bank financially incentivized to allow the fraud to continue (e.g., did the fraudster’s scheme allow the bank to earn significant interest on loaned money or transaction fees)?
- Did the bank owe any particular legal obligations with respect to the type of account in question that were ignored?
In sum, the Eleventh Circuit has made clear that pleading knowledge is not as difficult as some courts had made it out to be. Still, an attorney must adduce facts sufficient to give rise to an inference that the aider and abetter knew about the fraud. So, as part of your pre-suit investigation, ask the right questions.