When the Bank Ignored the Red Flags: How a $20M Crypto Scam Was Allowed to Happen

The Quiet Collapse of Trust

I was debugging a chain analysis script last Tuesday when I stumbled on an old case file: Michael Zidell’s lawsuit against Citigroup. A $20 million crypto scam. Forty-three transfers. A single phrase kept echoing in my mind: “The system failed to see what was obvious.”

Not because it was complex—but because it was too obvious.

It wasn’t some encrypted labyrinth or zero-day exploit. It was 43 transactions, nearly $400K funneled through a corporate account at Citigroup labeled Guju Inc—a name so generic it sounded like an AI-generated placeholder.

And still, no alarms went off.

The Algorithm That Failed to Listen

In my days at CoinMetrics, I built models that flagged anomalies before they became crises. We tracked patterns: sudden spikes in large integer transfers; repetitive use of offshore wallets; victims who’d suddenly shift from conservative investing to reckless NFT speculation.

This case had all three.

Yet Citigroup’s anti-money laundering (AML) system didn’t trigger. Not once.

Why? Maybe because the numbers were too clean—\(150K here, \)275K there—all whole figures with no decimal noise. To an algorithm trained on fraud patterns, this looked less like theft and more like… business.

But human judgment? That’s where it should’ve kicked in.

The Woman Who Never Existed

The scam began with Facebook messages from someone named Carolyn Parker—a self-proclaimed tech entrepreneur offering early access to exclusive NFTs.

She wasn’t real. But she felt real enough to someone already longing for validation in isolation.

digital loneliness is the soil where pig butchering thrives—where strangers become confidants over coffee chats and late-night DMs. That’s what made this not just a financial crime… but an emotional one. I know this well—I once poured three months’ savings into a ‘moonshot’ token after trusting my own version of ‘Carolyn.’ The only difference? My bank did flag it. The warning came too late for my pride—but not for my portfolio.

Why We Keep Getting Fooled by Numbers That Lie

Here’s what we don’t talk about enough: banks are legally required to monitor suspicious activity—but they’re not incentivized to stop every single scam. The cost of false positives (flagging innocent users) is high; the cost of missing one fraud? Often buried under risk assessments and compliance reports that prioritize scale over soul.

The law says banks must act when red flags appear—but what if those flags are invisible to systems built on outdated assumptions? Pig butchering isn’t new—it’s evolved. From pyramid schemes disguised as get-rich-quick apps to emotionally engineered scams using fake profiles and fabricated success stories, these predators now operate on platforms designed for connection… turning intimacy into exploitation.

The tragedy? When victims realize they’ve been played, they don’t blame themselves—they blame the system. And rightly so.