Banking News

Citi Loses US$500m Accidentally Transferred To Revlon Creditors

Citi Loses US$500m Accidentally Transferred To Revlon Creditors

(17 February 2021 – United States) Citigroup has lost in its attempt to retrieve US$500 million it erroneously transferred to a group of Revlon creditors in 2020.

Judge Jesse Furman of the U.S. District Court for the Southern District of New York labelled Citigroup's mistake “one of the biggest blunders in banking history”.

Though the law generally requires money mistakenly wired to be returned to its sender, Furman in his ruling cited an exception in New York that allows recipients to keep funds if they discharge a valid debt and if the recipient is not aware of the mistake upon its receipt of the funds.

Because the payment was applied to existing loans, and the lenders did not make any misrepresentations to induce the accidental repayment, Furman said the wire transfers were “final and complete transactions” and not subject to revocation.

The decision follows what Furman called “one of the biggest blunders in banking history”: a full loan repayment of US$893 million that Citibank mistakenly wired when it simply intended to pay approximately US$7.8 million in interest as some lenders returned part of the overpayment.

Citigroup said it “strongly disagrees” with the court's decision and intends to appeal the ruling.

“It appears that no mistake of the size or nature of Citibank’s had ever happened before and faced with these circumstances, the non-returning lenders believed, and were justified in believing, that the payments were intentional. Indeed, to believe otherwise, 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 $1 billion, would have been borderline irrational” Judge Furman ruled.

“We strongly disagree with this decision and intend to appeal. We believe we are entitled to the funds and will continue to pursue a complete recovery of them” a Citi spokesperson said.

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