Citibank cannot get back $ 500 million if it was accidentally wired, rules rule

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Citibank, acting as Revlon’s loan agent, planned to send about $ 8 million in interest payments to the cosmetics company’s lenders. Instead, Citibank accidentally transferred nearly 100 times that amount, including $ 175 million to a hedge fund. In everything, Citi C. accidentally sent $ 900 million to Revlon’s backers.

Citibank filed a lawsuit in August seeking the return of its funds, but still has not received $ 500 million from 10 investment advisory firms after the accidental transfer.

The law usually punishes those who spend money accidentally deposited into their accounts. Accidental transfers are common in the digital age and cables can be refunded immediately. A Pennsylvania couple was charged with crimes after accidentally depositing money into their account.

But New York law has exceptions to this rule, known as the “discharge-for-value-defense.”

Citibank is struggling to get money back accidentally transferred

If the beneficiary is entitled to the money and didn’t know it was accidentally wired, they can keep it. Revlon lenders said they believed Citibank was making prepayments on a loan. After all, the money that was accidentally transferred was the exact amount “to the penny” that Citibank owed them, even though the loan was not due to expire for quite some time.

“We are extremely pleased with Judge Furman’s thoughtful, thorough and detailed decision,” said Benjamin Finestone, who represented two lenders, Brigade and HPS Investment Partners.

‘Borderline irrational’

The court ruled that the lenders correctly believed the payment was intentional. Citibank itself didn’t 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 had never been made before, to the tune of nearly $ 1 billion – would have been irrational,” the court document said.

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

DFREY5: I feel really bad for the person who made a $ 900mm wrong payment. Not a great career move.

JRABINOWIT12: Looks like they’ll be looking for new people to join their Ops group

DFREY5: How was work today, honey? It was ok, except I accidentally sent $ 900mm to people who shouldn’t have it

DFREY5: Disadvantage of working from home. maybe the dog hit the keyboard

The lenders cannot take the money and flee. Since an appeal is possible, a temporary restraining order is still in effect.

“We strongly disagree with this decision and plan to appeal. We believe we are entitled to the funds and will continue to pursue their full recovery,” Citigroup said in a statement.

The pandemic has hurt makeup brands, such as Revlon REV, whose shares are trading more than 40% lower than a year ago.

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