Citibank is barred from having back $650 million it wired in one of the biggest blunders in banking history.
Since making one of the “greatest blunders in banking history,” Citibank would be stopped from having back around $500 million US dollars it mistakenly wired to Revlon.
When it came to sending out interest payments, Citibank, operating as Revlon's loan agent, planned to send around $US8 ($10.35) million to the cosmetic company's lenders.
Instead, Citibank wirelessly sent almost $175 million (over 226 million dollars) to a hedge fund.
In particular, Citibank mistakenly sent over $900 million to Revlon's lenders.
In August, Citibank filed a lawsuit demanding the return of $US500 million, but it has not obtained $A650 million from 10 investment advisory firms because of an unintended switch.
a distinct exception to the general rule
In the US, those who unintentionally waste money deposited in their accounts will typically be penalized.
With so many transfers taking place via the digital era, it is no wonder that wires can be paid back immediately. Besides, there are still fines for the false presumption of ownership.
A Pennsylvania couple was criminally charged after mistakenly depositing money into their account.
However, the law in New York has many exceptions, such as the "discharge-for-value defense."
In such a situation, the beneficiary may retain the money if they are entitled to it and were unaware that it was unintentionally wired.
According to the Revlon lenders, it was assumed that Citibank was making prepayments for a loan.
This was because “to the penny” Citibank owed them, and the loan was not set to mature for quite some time.
Benjamin Finestone, who represented Brigade and HPS Investment Partners, said, “We are very pleased with Judge Furman's thorough, well-reasoned decision.”
straddle the line between reason and irrationality
The court agreed with the lenders, who claimed the payment was deliberate.
It was not until nearly a day later that Citibank itself discovered the extent of its error.
"To believe that Citibank, one of the most sophisticated financial institutions in the world, had made a mistake that had never happened before, to the tune of nearly $US1 ($A1.29) billion—would have been beyond reckless," the ruling read.
In the chat, which was produced the day after the electrical error, HPS staff joked about the mistake.
DFREY5: I feel bad for the person who made a $900 million erroneous payout. An unwise career change. How was your day today? BAD: Downside to working from home is that I mistakenly sent $900 million to people who weren't supposed to have it It is likely that the dog attacked the keyboard.
What will happen next?
Lenders cannot simply run off with the money.
A restraining order is also in place and an appeal is still a possibility.
We absolutely disagree with this ruling, and we intend to appeal. We are sure that we are legally entitled to the assets, and we plan to keep pushing for their recovery,” Citigroup said in a statement.
Leading beauty brands, such as Revlon (REV), are trading 40% lower than a year earlier, in the aftermath of the pandemic.