ATLANTA (CNN) – After committing one of the “biggest blunders in banking history”, Citibank will not be allowed to recover almost half of the $ 1 billion it accidentally connected to Revlon creditors, a US District Court judge has ruled .
Citibank, which acted as Revlon’s lending agent, intended to send interest of about $ 8 million to the cosmetics company’s lenders. Instead, Citibank accidentally connected the amount, including $ 175 million, to a hedge fund almost 100 times. In total, Citi accidentally sent $ 900 million to Revlon lenders.
Citibank filed a lawsuit in August requesting the return of its funds, but has not yet received $ 500 million from 10 investment advisory firms following the accidental transfer.
An exception to the rule
The law usually punishes those who spend money accidentally deposited in their accounts. Accidental transfers are common in the digital age, and wires can be refunded instantly. A Pennsylvania couple faced serious charges after spending money accidentally deposited in their account.
But New York law has exceptions to this rule, known as “defense discharge.”
If the beneficiary has the right to money and did not know that he was accidentally connected, he can keep it. Revlon lenders said they believed Citibank was making advance payments on a loan. After all, the money accidentally connected was the exact amount “up to the penny” that Citibank owed him, although the loan was not set to mature for some time.
“We are extremely pleased with the careful, detailed and thorough decision of Judge (Jesse) Furman,” said Benjamin Finestone, who represented two creditors, the Brigade and HPS investment partners.
DFREY5: How was work dear today? It was ok, except that I accidentally sent $ 900mm to people who shouldn’t have it.
–Domestic chats between HPS employees one day after Citibank sent an erroneous advance payment
“Irrational limit”
The court ruled that the creditors were justified in believing that the payment was intentional. Citibank itself did not realize the extent of its mistake until almost a day later.
“To believe that Citibank, one of the most sophisticated financial institutions in the world, made a mistake that has never happened before, worth almost $ 1 billion – would have been an irrational limit,” the court document reads. .
The judge’s ruling used internal discussions between HPS employees as further evidence that creditors had no idea that the wiring was a mistake until after Citibank sent notifications. In the chat, which was dated a day after the wrong wiring, HPS employees joked about the error:
DFREY5: I feel very bad for the person who made an erroneous 900 mm payment. It’s not a great career move. . . .
JRABINOWIT12: It certainly looks like they’ll be looking for new people for their Ops group
DFREY5: How was work dear today? It was ok, except that I accidentally sent $ 900mm to people who shouldn’t have it.
DFREY5: The disadvantage of working from home. maybe the dog hit the keyboard
Lenders cannot take the money and run away. As an appeal is a possibility, a temporary restraining order is still in force.
“We do not agree with this decision and we intend to appeal. We believe we are entitled to funds and will continue to fully recover,” Citigroup said in a statement.
The pandemic has affected makeup brands such as Revlon, shares of which it trades 40% less than a year ago.
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