Citibank committed one of the biggest blunders in banking history when it transferred almost half a billion dollars by mistake on August 11. A federal judge ruled that the bank would not be allowed to recover the money from Revlon lenders.
Citibank was Revlon’s loan agent. It was supposed to make interest payments in the tune of about $8 million to Revlon’s lenders. Instead it wired $900 million to them including $175 million to a hedge fund.
Although accidental transfers happen in the digital age and most of the transfers are returned to the original owner there are exceptions to the rule. New York law has a provision called “discharge-for-value defense.”
If a beneficiary had the right to obtain the money and did not know that the money was wired by mistake, they could keep the money. The lenders for Revlon thought that Citibank was wiring them prepayments for the loan they had already disbursed. The amounts wired were correct though the loans were yet to mature.
Judge Jesse Furman ruled against Citibank and the court document said that it was difficult to believe that one of the most sophisticated banks in the world could make such a mistake and it “would have been borderline irrational.” It also used internal chats between HPS employees to make its ruling.
Citibank did not realize the huge error it had made until almost twenty four hours later.
The lenders were very pleased with the judgement and called it a “thoughtful, thorough and detailed decision.”
The lenders are still under a temporary restraining order as an appeal by the bank is still a possibility.
Citigroup in a statement said that it disagreed with the ruling and would appeal. It said that it would continue to pursue all courses to recover all the money that was accidentally wired.
Follow us on Google news for more updates and News