Wednesday 17th February 2021
500 million transferred incorrectly
Citibank does not get any money back
Actually, Citibank, as Revlon's loan administrator, is only supposed to transfer interest to the group's creditors. Instead, she also transfers the entire loan amount. Not all recipients return the money. They don't have to either, ruled a US court.
US banking giant Citibank cannot reclaim $ 500 million mistakenly sent to mutual funds. A New York court decided that. Citibank has "committed one of the grossest blunders in banking history," wrote Judge Jesse Furman in his judgment.
The big bank accidentally transferred $ 900 million to creditors of the cosmetics company Revlon last August. Actually, the bank that administered the loan only wanted to transfer loan interest of $ 7.8 million. However, the entire loan amount including the interest was paid out. When the mistake was discovered, Citigroup asked for the money back, but only got $ 400 million. Ten mutual funds declined to repay. The case ended up in court because of it.
Judge Furman has now stated that under US law incorrectly transferred money must usually be refunded. The law of the state of New York provides for an exception: "The recipient may keep the money if it is used to pay valid debts, the recipient has not provided false information to trigger the payout, and if the recipient has not noticed the error", wrote Furman. In this case, the creditors assumed "in good faith" and with sufficient justification that Revlon had repaid the loan from 2016 early.
Between that assumption and the assumption "that Citibank or Revlon mistakenly transferred more than $ 900 million – something a bank may never have done before and probably never will – it would have been almost irrational to assume the latter," wrote the judge. Citibank firmly rejected the verdict and announced that it would appeal. Citibank is entitled to the money and will continue to campaign for a full repayment, said a spokeswoman.
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