Citibank can’t recover $ 500m by mistake, judge rules

ATLANTA (CNN) – After making one of “the biggest fatal mistakes in banking history,” Citibank will not be allowed to recover the nearly half a billion dollars it sent in error to Revlon’s lenders, a US District Court judge ruled.

Citibank, who was acting as a Revlon loan agent, had intended to send about $ 8 million in interest payments to the cosmetics firm’s lenders. Instead, Citibank mistakenly sent nearly 100 times that amount, including $ 175 million to a hedge fund. In all, City sent by mistake $ 900 million For Revlon Lenders.

Citibank filed a lawsuit in August seeking the return of its money, but it has yet to receive $ 500 million from 10 investment advisory firms after the accidental transfer.

An exception to the rule

The law usually penalizes those who mistakenly spend money on deposit in their accounts. Unintended transfers are common in the digital age, and wires can be paid for instantly. A couple from Pennsylvania Face criminal charges After spending money accidentally deposited into their account.

But New York law has exceptions to this rule, known as “defending dump versus value.”

If the recipient is owed the money and does not know it was connected in error, they can keep it. Revlon’s lenders said they believed Citibank was making prepayments for a loan. After all, the money transferred by wire was the exact “penny” that Citibank owed them, even though the loan had not been set to maturity for some time.

“We are very pleased with Judge (Jesse) Foreman’s thoughtful, thorough and detailed decision,” said Benjamin Finston, who represented lenders, Major General and investment partners HBS.

DFREY5: How did honey work today? It was okay, except that I accidentally sent $ 900 million to people who were not supposed to get it

– An internal conversation between HPS employees a day after Citibank sent the wrong early payment

‘Irrational limits’

The court ruled that the lenders were justified in believing the payment was intentional. Citibank itself didn’t realize the scale of its mistake until about a day later.

“The belief that Citibank, one of the most advanced financial institutions in the world, made an unprecedented mistake of nearly a billion dollars – it would have become illogical,” the court document said.

The judge’s ruling used internal conversations between HPS employees as further evidence that creditors had no idea the wiring was a mistake until after Citibank sent out notices. In the chat, which was dated a day after a faulty delivery, HPS employees quipped about the error:

DFREY5: I feel really bad for a guy who dumped a fat wrong batch of 900mm. Not a great career movement. . . .

JRABINOWIT12: It definitely looks like they will be looking for new people for their group of operations

DFREY5: How did honey work today? It was okay, except that I accidentally sent $ 900 million to people who were not supposed to get it

DFREY5: The Downside of Working from Home. Maybe the dog hit the keyboard

Lenders cannot take money and run away. As an appeal is a possibility, the temporary injunction remains in effect.

“We strongly oppose this decision and intend to appeal it. We believe we are eligible to receive the funds and will continue to seek a full refund,” Citigroup said in a statement.

The The epidemic has hurt makeup brands Like Revlon, whose shares are trading more than 40% less than last year.

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