Citigroup can’t get back $500 million it mistakenly sent to Revlon: US Judge

Citigroup Inc. will be losing money after a U.S. judge ruled that it cannot retrieve the remaining $500 million it sent to Revlon by mistake. This case is about the incorrect wire transfer where the investment bank wired almost $900 million to the cosmetic company’s lenders last year.

The judge’s ruling

Citigroup filed a lawsuit to recoup the money from Revlon’s lenders since not all of them were willing to return the cash. The decision on the case was released this week but unfortunately, the bank lost in the legal battle.

As per Reuters, U.S. Manhattan District Judge Jesse Furman declared that the wire transfers in August last year are not subject to revocation because the transactions were final and complete.

The federal judge made it clear that Citigroup is not entitled to get back the $500 million that it mistakenly sent out to Revlon Inc. lenders.

It was added that even if the money truly belongs to Citigroup, it cannot get it back anymore as it is now considered "a banking error of perhaps unprecedented nature and magnitude." The humiliating error forced the bank to face regulators and adjust the company’s internal control system.

How the costly gaffe happened

Citigroup has been serving as Revlon’s loan agent, and in August 2020, it transferred funds amounting to $893 million to the cosmetic firm’s lenders. The money appeared to be meant as payments for loans that are not yet due until 2023.

It was learned that the bank was only intending to wire a $7.8 million interest payment, but almost $1 billion was sent instead. The bank pointed at human error as the cause of the blunder.

Not long after the incident, some lenders wired the money back since the transfer was a mistake. However, the others refused to return the cash, and this prompted Citigroup to file a lawsuit.

Furman sided with the 10 asset managers after declaring that they don’t have to return the money. Bloomberg reported that some lenders, including Brigade Capital Management, HPS Investment Partners, and Symphony Asset Management, are not obligated to send back over $500 million to Citibank as they were not aware that there was a mistake when the funds were sent.

“The non-returning lenders believed, and were justified in believing, that the payments were intentional,” Judge Furman said in his decision. “To believe otherwise - to believe that Citibank,

Meanwhile, Citibank is planning to appeal because they think they are entitled to the funds they lost.