Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Citi Bank sent $900 million to customers by mistake. Half of them refuse to give it back.

Citi Bank sent $900 million to customers by mistake. Half of them refuse to give it back.

Bank now goes to trial to get rest back from Revlon creditors. Citibank has recovered only about $400 million in legal dispute.

A trial over Citigroup Inc.’s efforts to recover more than $500 million it mistakenly sent to Revlon Inc. lenders got underway on Wednesday morning after a Citi official suggested that the creditors blew the bank off when it alerted them to the error. 

A contractor in India for Citigroup Inc.’s Citibank retail business, Raj had been the “checker” on a periodic interest payment to a group of Revlon Inc. creditors, with the bank acting as administrative agent on the loan. Suddenly he realized that Citi had instead sent some of those creditors the full remaining principal.


“Bad news,” his supervisor told the head of North American loan operations by chat on Aug. 12. It was, in fact, $900 million of bad news.

Raj will testify this week by videoconference in federal court in Manhattan as Citibank goes to trial to recover the more than $500 million it still hasn’t gotten back from the defendants, asset managers including Brigade Capital Management, HPS Investment Partners and Symphony Asset Management. Unless there’s a last-minute settlement, the trial -- over one of the biggest banking errors in recent memory -- will be closely watched on Wall Street, and its outcome could have a significant impact on the industry.

Representatives for Brigade and Symphony declined to comment on the case. A representative for HPS didn’t immediately provide comment outside of business hours.

‘Shot Across the Bow’

Citibank argues that because the funds were its own, not Revlon’s, and were transferred in error, they must be returned. To Revlon creditors already locked in a bitter fight with the cosmetics giant over its restructuring earlier in the year, the money satisfied a debt, and they should be allowed to keep it.


Citibank has “a pretty strong case,” said Eric Talley, a professor of corporate law at Columbia Law School, but it’s “not so crystal clear that it doesn’t involve a little bit of risk.” The outcome will likely hinge on the creditors’ contention that they got what they were entitled to, he said.

If they prevail, Talley said, it could be “a shot across the bow” of the big commercial banks, signaling that they won’t be able to get courts “to ride to the rescue to salvage an error that you committed because of poor internal controls.”

Read More: Revlon to Avoid Bankruptcy Filing Upon Completing Debt Deal

Meanwhile Citi, which has had to explain the embarrassing error to the Office of the Comptroller of the Currency and the Federal Reserve, already has “a little bit of a black eye,” Talley said. Even if the bank wins, he said, “it would be an overshoot for Citibank to pop the champagne corks and say we’re vindicated after all.”

Citigroup said it would do better.

“As previously stated, we take pride in the role that we play as a global leader in financial services and recognize that an operational error of this nature is unacceptable,” the company said in a statement. “We look forward to presenting our case in court.”

‘Mistakes Do Happen’

Financial services trade groups have stuck up for Citibank in court filings, arguing that a win for the creditors would expose banks that facilitate wire transfers and serve as administrative agents to unnecessary risk. The Loan Syndications and Trading Association, whose more than 500 members include Citi as well as most of the creditors involved in the case, said that “mistakes do happen” and that participants routinely return incorrect payments, as many of the Revlon creditors have.

A ruling for the defendants would “undermine the smooth functioning of syndicated lending” and promote “the kind of non-cooperative opportunistic behavior that destabilizes any market dependent on trust and transparency,” the group said.


At the trial, which begins Wednesday, Citibank plans to present testimony from witnesses like Raj who can explain the processing errors that led to the payments, as well as internal communications showing that Revlon intended only to have the bank send interest. Revlon was allowed to pay the loans off early only if it notified the creditors three days in advance, Citi argues in court filings, and the balance wasn’t set to mature for another three years.

In addition, the bank says, a lawsuit the creditors filed just one day after the transfers, demanding that Revlon accelerate payment of the debt, shows they knew they weren’t entitled to the early full payment Citibank sent on Aug. 11. And the creditors alleged in their suit that Revlon was insolvent, meaning they knew it didn’t have the money to make the payments, Citi argues.

“They should at least have suspected a mistake when they received payments totaling the amount of principal outstanding,” the bank contends.

Perelman’s Record

The defendants argue that they accepted the money in good faith and didn’t receive notice of the error until almost 20 hours after the transfers were completed. They say they had ample reason to believe Revlon intended to pay off the loan. For instance, if Revlon hadn’t repaid the debt or repurchased enough of it, the company probably would have defaulted and “almost certainly” would have filed for bankruptcy, they argue.

They note that Revlon paid off debt at face value at least five times in connection with the restructuring in May and twice more over the summer. They also note that Revlon gave creditors that consented to the restructuring the right to force the company to buy back its loans under the amended credit agreement. As a result, once they received the wire transfers, they considered the loans paid off.

“It was especially unlikely that any term lender would have concluded that the August 11 transfer was a mistake given the recent history between the parties,” they argue.

Referring to Ronald Perelman, the billionaire whose holding company MacAndrews & Forbes owns more than 80% of Revlon, they say “it is simply nonsense to suppose that sophisticated lenders, familiar with Mr. Perelman’s track record, would have doubted his ability to pay down the term loans, just as he had found ways to pay other Revlon debt before.”


The case is Citibank NA v. Brigade Capital Management, 20-cv-6539, U.S. District Court, Southern District of New York (Manhattan).

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Elon Musk Unveils Grokipedia: An AI-Driven Alternative to Wikipedia
Russia’s President Putin Declares Burevestnik Nuclear Cruise Missile Ready for Deployment
US Administration Under President Donald Trump Reportedly Lifts Ban on Ukraine’s Use of Storm Shadow Missiles Against Russia
White House Announces No Imminent Summit Between Trump and Putin
China Presses Netherlands to “properly” Resolve the Nexperia Seizure as Supply Chain Risks Grow
Merz Attacks Migrants, Sparks Uproar, and Refuses to Apologize: “Ask Your Daughters”
Apple Challenges EU Digital Markets Act Crackdown in Landmark Court Battle
Shouting Match at the White House: 'Trump Cursed, Threw Maps, and Told Zelensky – "Putin Will Destroy You"'
‘No Kings’ Protests Inflate Numbers — But History Shows Nations Collapse Without Strong Executive Power
"The Tsunami Is Coming, and It’s Massive": The World’s Richest Man Unveils a New AI Vision
EU Moves to Use Frozen Russian Assets to Buy U.S. Weapons for Ukraine
Europe Emerges as the Biggest Casualty in U.S.-China Rare Earth Rivalry
“Firepower” Promised for Ukraine as NATO Ministers Meet — But U.S. Tomahawks Remain Undecided
The Sydney Sweeney and Jeans Storm: “The Outcome Surpassed Our Wildest Dreams”
Dutch Government Seizes Chipmaker After U.S. Presses for Removal of Chinese CEO
AI and Cybersecurity at Forefront as GITEX Global 2025 Kicks Off in Dubai
Ex-Microsoft Engineer Confirms Famous Windows XP Key Was Leaked Corporate License, Not a Hack
Hungarian Prime Minister Viktor Orbán stated that Hungary will not adopt the euro because the European Union is falling apart.
Mayor in western Germany in intensive care after stabbing
Australian government pays Deloitte nearly half a million dollars for a report built on fabricated quotes, fake citations, and AI-generated nonsense.
BYD’s UK Sales Soar Nearly Nine-Fold, Making Britain Its Biggest Market Outside China
Latvia to Bar Tourist and Occasional Buses to Russia and Belarus Until 2026
Wave of Complaints Against Apple Over iPhone 17 Pro’s Scratch Sensitivity
Munich Airport Reopens After Second Drone Shutdown
Pro Europe and Anti-War Babiš Poised to Return to Power After Czech Parliamentary Vote
Sean ‘Diddy’ Combs Sentenced to Fifty Months in Prison Following Prostitution Conviction
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
The Personality Rights Challenge in India’s AI Era
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Study Finds No Safe Level of Alcohol for Dementia Risk
Trump Says Ukraine Can Fully Restore Borders with NATO Backing
Europe Signals Stronger Support for Taiwan at Major Taipei Defence Show
Germany Weighs Excluding France from Key European Fighter Jet Programme
Cyberattack Disrupts Check-in and Boarding Systems at Major European Airports
Björn Borg Breaks Silence: Memoir Reveals Addiction, Shame and Cancer Battle
When Extremism Hijacks Idealism: How the Baader-Meinhof Gang Emerged and Fell
JWST Data Brings TRAPPIST-1e Closer to Earth-Like Habitability
Trump Orders $100,000 Fee on H-1B Visas and Launches ‘Gold Card’ Immigration Pathway
France’s Looming Budget Crisis and Political Fracture Raise Fears of Becoming Europe’s “Sick Man”
Three Russian MiG-31 Jets Breach Estonian Airspace in ‘Unprecedentedly Brazen’ NATO Incident
European manufacturers against ban on polluting cars: "The industry may collapse"
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
Christian Brueckner Released from German Prison after Serving Unrelated Sentence
×