Friday, February 26, 2021

$900m gaffe: US decide says Citigroup can’t recoup Revlon payout

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A United States federal decide dominated that the financial institution just isn’t entitled to the $893m it wired to Revlon’s lenders by mistake.

A United States federal decide on Tuesday stated banking big Citigroup Inc just isn’t entitled to recoup lots of of tens of millions of {dollars} of its personal cash that it mistakenly wired to the lenders of a cosmetics firm.

US District Judge Jesse Furman in Manhattan stated the August 11, 2020 wire transfers to lenders of Revlon Inc at concern had been “final and complete transactions, not subject to revocation”, calling the error “a banking error of perhaps unprecedented nature and magnitude”.

A spokeswoman for Citigroup stated the financial institution strongly disagrees with this resolution and intends to enchantment.

“We believe we are entitled to the funds and will continue to pursue a complete recovery of them,” the financial institution stated.

The case stemmed from an incident the place Citigroup, performing as Revlon’s mortgage agent, wired $893m to Revlon’s lenders, showing to repay a mortgage not due till 2023.

Citigroup had supposed to ship a $7.8m curiosity fee, and blamed human error for the gaffe.

Some lenders returned cash they had been despatched, however 10 asset managers together with Brigade Capital Management, HPS Investment Partners and Symphony Asset Management refused, prompting Citigroup’s lawsuit to recoup the estimated $501m they obtained.

Citigroup had argued that the lenders ought to return the cash as a result of they knew or ought to have recognized the financial institution made a mistake, and that Revlon couldn’t afford the fee.

But in a 101-page resolution, following a six-day trial in December, Furman famous that the transfers matched “to the penny” what the lenders had been owed, and stated it appeared there had by no means been a mistake of this measurement earlier than.

“The non-returning lenders believed, and were justified in believing, that the payments were intentional,” Furman wrote. “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 $1bn – would have been borderline irrational.”

Lawyers for each events didn’t instantly reply to requests for remark.

Administrative brokers sometimes distribute curiosity funds and carry out back-office companies for purchasers reminiscent of Revlon.

Industry teams have stated a ruling in opposition to Citigroup may expose banks to extreme legal responsibility dangers.

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