Manchester City roared back from a two-goal half-time deficit to score three times after the break.
Manchester City manager Pep Guardiola refused to be drawn on the report at his pre-match press conference on Friday.
Liverpool were drawn to play FC Porto in the knockout rounds for the second year in succession.
Raheem Sterling, Bernardo Silva, Phil Foden and Gabriel Jesus all scored after the interval to complete City's biggest home win in the Champions League.
A 4-2 victory over Burnley hauled Liverpool back to within a point of Premier League leaders Manchester City.
A 3-1 victory over Watford, helped Manchester City open up a four-point lead at the top of the Premier League.
City Football Group (CFG), bankrolled by Sheikh Mansour of the Abu Dhabi royal famil, own or have stakes in seven clubs around the world, including star side Manchester City.
Mario Balotelli showed off a new goal celebration as he took a selfie video with his teammates and posted it on Instagram during the game.
Jurgen Klopp's men calmed fears over their staying power following a recent dip in form as they chase down their first top-flight title since 1990.
Maurizio Sarri, who reacted furiously when Kepa Arrizabalaga refused to be substituted, said the incident had been a "misunderstanding".
Maurizio Sarri was visibly angry as Kepa Arrizabalaga refused to follow orders from the touchline.
Manchester City beat Chelsea 4-3 on penalties to clinch Carabao Cup title.
Manager Maurizio Sarri is in danger of being sacked after a dismal first season at Stamford Bridge.
Manchester City demolished Chelsea 6-0 to go top while Tottenham Hotspur cemented their third place with a 3-1 win over Leicester City.
Eden Hazard said is happy at Chelsea and agrees with manager Maurizio Sarri over his tactics.
Manchester United moved into fourth place in the Premier League, one point above Chelsea, who face Manchester City on Sunday.
Liverpool had the chance to move 7 points clear at the top, but back-to-back draws have seen them reeled in by Manchester City.
Pep Guardiola's side took the lead through Aymeric Laporte's header on the stroke of half-time at Goodison Park.