In the biggest blunder in banking history, global giant Citibank accidentally transferred $900 million (Rs 6,554 crore) to cosmetic company Revlon’s creditors. Citibank was acting as a loan agent between Revlon and its creditors, and has lost the ruling on Tuesday, 16 February, in a US District Court to recover the full amount.
Federal Judge Jesse Furman ruled on Tuesday that the bank was not entitled to recoup the money under the “discharge-for-value-defense” that allows lenders to keep accidental transfers if they didn’t know it was one, calling it “a banking error of perhaps unprecedented nature and magnitude,” quoted Reuters.
The Judge observed in his 101-page ruling that the transfers, which took place in August 2020 were “final and complete transactions, not subject to revocation,” added the report.
“The transfers matched to the penny the amount of principal and interest outstanding on the loan. The accompanying notices referred to interest being ‘due’, and the only way in which that would have been accurate was if Revlon was making a principal prepayment.”Jesse Furman, Federal Judge, according to Mint
The bank might lose nearly $500 million in what Citibank has argued is a “human error”, as the amount they had transferred was for a loan, yet to mature for 2023.
Citibank stated that they 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,” stated Citibank according to CNN.
The Accidental Transfer
The New York-based bank transferred nearly $900 million accidentally to Revlon’s creditors, instead of sending the nearly $8 million dollars interest payment it was supposed to, that was due to mature in 2023.
The bank contacted the lenders saying the transfer was a “human error”, and asked for a repayment. Only nearly $300 million dollars were returned, but ten asset managers, including Brigade Capital Management, HPS Investment Partners and Symphony Asset Management, refused to return the amount, amounting to nearly $500 million dollars, according to CNN.
Citibank then sued them in August 2020 but have lost the case in the US district court in Manhattan.
(With inputs from Reuters, CNN and Mint.)
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