Citibank might lose nearly $500 million after committing what has been termed as “one of the biggest blunders in banking history,” as per reports.
Citibank had accidentally transferred $900 million to the lenders of cosmetic company Revlon to which it was acting as a loan agent. It will not be allowed to recover $500 million of the amount that it is yet to receive, according to a ruling by Judge Jesse Furman of United States District Court in New York, as per a Wall Street Journal report.
So, what exactly happened? As per a CNN report , the bank had meant to transfer nearly $8 million in interest payments to Revlon’s lenders. However, it accidentally wired $900 million.
The nearly $900 million debt that Revlon owed wasn’t due to be paid until 2023, as per the WSJ report.
While a few lenders returned the amount, nearly $385 million, some lenders refused to do so. The bank thus sued 10 investment advisory firms in August 2020 after the accidental transfer in order to recover the remaining $500 million. The firms sued include Brigade, Symphony Asset Management LP and HPS Investment Partners LLC.
According to the court ruling, however, the lenders can keep the money wired to them owing to an exception to the rule related to accidental transfers known as the “discharge-for-value-defence,” CNN Business reported.
A beneficiary can keep the money if they were entitled to it and did not know that it was accidentally transferred.
While Citi argued that it was a “human error” and that the recipients were informed right away about being paid in error, the lenders claimed that they were unaware of the same until Citi claimed the same and demanded repayment.
Apart from this, the money accidentally wired was the amount they were supposed to be paid “to the penny” for the loan that was yet to mature.
Judge Furman agreeing with the lenders said that Citi’s error was “one of the biggest blunders in banking history,” as quoted by the WSJ report.
Citi has said that it will appeal the decision.
“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,” Citigroup said in a statement as quoted by CNN Business report.