NEW YORK, Jan 21 (Reuters) - A federal judge on Tuesday

rejected Citigroup's ( C/PN ) bid to dismiss a lawsuit by New York

Attorney General Letitia James claiming it failed to protect

customers from online scammers and refused to reimburse

customers who were victimized.

U.S. District Judge Paul Oetken in Manhattan said the bank's

Citibank unit must face James' claim it violated a 1978 federal

law concerning electronic wire transfers, and parts of three

other claims.

Oetken said Congress intended the 1978 law, the

Electronic Fund Transfer Act, to protect consumers from

sophisticated frauds involving technologies they may not

understand, leaving banks in a better position to shoulder the

risks of fraud.

In

seeking a dismissal

of the lawsuit last April, Citigroup ( C/PN ) argued that the law

expressly excluded wire transfers.

But in his 62-page decision, Oetken said "Citibank's

reading would operate in derogation of the statutory purpose."

The judge dismissed some claims against New York-based

Citigroup ( C/PN ), the third-largest U.S. bank.

Citigroup ( C/PN ) had no immediate comment. James' office also

had no immediate comment.

James sued last January, saying scammers stole millions of

dollars from Citibank customers because the bank's security

systems could not investigate red flags such as unrecognized

devices, changes in user names and passwords, and "phishing."

In one instance, a customer allegedly lost $40,000 after

clicking a text message link that appeared to be from Citibank.

James also accused Citigroup ( C/PN ) of coercing customers into

signing affidavits that limited their ability to recoup losses,

and then summarily rejected reimbursement claims. The lawsuit

sought restitution and a $5,000 civil fine per violation.

Citigroup ( C/PN ) has acknowledged online wire fraud as a "real"

problem, but said its systems stop "countless" fraudulent

transactions every day.

The case is New York v Citibank NA, U.S. District Court,

Southern District of New York, No. 24-00659.