Citibank will not be able to recover half a billion dollars it accidentally wired to Revlon’s lenders, a U.S. District Court judge ruled on Tuesday.
The New York City-based bank meant to send $7.8 million in interest payments to the cosmetic company’s lenders but gave out $900 million by mistake, according to court documents. Some of these lenders returned the money, but others did not, and Citibank filed a lawsuit in August seeking $500 million back from 10 investment advisory firms.
Calling the transfer “one of the biggest blunders in banking history” in his ruling, Judge Jesse Furman said accidental wirings would normally be reversed due to the recipient’s “unjust enrichment,” but Revlon benefited from an exception under New York law.
“The recipient is allowed to keep the funds if they discharge a valid debt, the recipient made no misrepresentations to induce the payment, and the recipient did not have notice of the mistake,” Furman wrote.
The judge said the resulting payments equaled “to the penny,” the amounts of principal and interest that Revlon owed to its lenders, thus fulfilling the stated requirements of the legal exception. Consequently, Furman ruled that “Citibank is not entitled to its money back.”
Citibank, the consumer division of the multinational Citigroup, wired the funds on Aug. 11, 2020. The company did not realize its mistake until a day later and after the bank had sent notices. Furman cited an internal chat by HPS Investment Partners employees, which was one of the lenders, as evidence that the employees did not know that the wire was a mistake until after the fact.
“I feel really bad for the person that fat fingered a $900mm erroneous payment,” an employee wrote on Aug. 12. “Not a great career move.”
The defendants celebrated the judge’s decision.
“We are extremely pleased with Judge Furman’s thoughtful, thorough and detailed decision,” Benjamin Finestone, a defense attorney in the case, told the Washington Examiner.
Citibank said it plans to appeal, and the judge kept in place a temporary restraining order preventing the 10 firms from using the money.
“We strongly disagree with this decision and intend to appeal,” a representative told the Washington Examiner. “We believe we are entitled to the funds and will continue to pursue a complete recovery of them.”
