Citibank is unable to recover the $ 500 million it connected by mistake, according to the judge

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Citibank, which acted as Revlon’s lending agent, intended to send about $ 8 million in interest payments to the cosmetics company’s lenders. In contrast, Citibank accidentally connected almost 100 times that amount, including $ 175 million to a hedge fund. In all, Citi (C) accidentally sent $ 900 million to Revlon lenders.

Citibank filed a lawsuit in August to demand the return of its funds, but has yet to receive $ 500 million from ten investment advisory firms following 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 paid for instantly. A Pennsylvania couple faced crime after spending money accidentally deposited into their account.

But New York law has exceptions to this rule, known as “defense by value.”

Citibank struggles to recover money by mistake

If the beneficiary is entitled to the money and did not know that it had been accidentally wired, he can keep it. Revlon lenders said they believed Citibank was connecting prepayments on a loan. After all, the accidentally connected money was the exact amount “per cent” that Citibank owed them, even though the loan was not expected to mature for quite some time.

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

“Irrational limit”

The court ruled that the lenders had justification for believing the payment was intentional. Citibank itself did not realize the magnitude of its mistake until almost a day later.

“Believing that Citibank, one of the world’s most sophisticated financial institutions, had made a mistake that had never happened before, worth nearly $ 1 billion, would have been an irrational limit,” the court document says.

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

DFREY5: I feel really bad for the person who made fat a 900mm wrong payment. It’s not a big professional move. . . .

JRABINOWIT12: No doubt they seem to be looking for new people for their Ops group

DFREY5: How did it work today, love? It was okay, except that I mistakenly sent $ 900mm to people who weren’t supposed to have it

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

Lenders cannot take the money and run. Because an appeal can be filed, a temporary restraining order is still in effect.

“We do not fully agree with this decision and intend 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 like Revlon (REV), whose shares are trading at more than 40% compared to a year ago.

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