Citigroup Inc, multi-national American investment bank had lost a legal battle to recover more than $500 million. The investment bank had mistakenly wired the money to cosmetics firm Revlon Inc (NASDAQ: REV) on August 11, 2020. Citigroup intended to send $7.8 million interest payments but ended up making one of the largest mistakes in history of U.S. banks.
On Tuesday, U.S. District Judge Jesse Furman ruled that ten asset managers for the lenders including HPS Investment Partners, Brigade Capital Management and Symphony Asset Management are not obliged to return $504 million to Citibank.
Mr. Furman argued that it doesn’t make sense that a financial institution like Citibank makes such a mistake with that amount of money. Mr. Furman ruled in favor of the ten investment firms that totaled more than $500 in the mistaken wire transfers.
“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 $1 billion would have been borderline irrational,” wrote Furman.
Citigroup can’t retrieve money according to NY law
U.S. law obliges receivers to return the money if it’s mistakenly wired. However, Furman cited that the case is an exception in New York. He added that the city allows recipients to not return the funds if the recipient doesn’t find out about the mistake upon money receival, and if they discharge a valid debt.
“It appears that no mistake of the size or nature of Citibank’s had ever happened before… [And] faced with these circumstances, the non-returning lenders believed, and were justified in believing, that the payments were intentional. Indeed, 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 $1 billion—would have been borderline irrational.” Furman ruled on Friday.
Furman added that the wire transfers were “final and complete transactions” and won’t be revoked. He described the mistake as “one of the biggest blunders in banking history”. However, Citigroup replied saying it “strongly disagrees” with the court decision and it will be appealing the ruling.
A Citi spokesperson said: “We strongly disagree with this decision and intend to appeal,” Tuesday. We believe we are entitled to the funds and will continue to pursue a complete recovery of them.
In fact, the wire mistake included over $893 million to Revlon’s lenders. However, after Citigroup filed several lawsuits against lenders, they were able to recover $400 million.