US court ruled that Citibank can’t get an amount of $500 million transferred by mistake for Revlon’s lenders, and that the recipients of the money can keep it.
Citibank ,thus, lost a lawsuit to recover $500 million out of the $900 million, the total value of an amount that was mistakenly transferred.
The bank had filed the case in August of 2020, demanding the return of its money. The bank had intended to transfer $8 million, which is loan interest, to a group of cosmetics company lenders.
While Citibank was able to recover $400 million, through its efforts before the court’s ruling, it was unable to recover the remaining amount.
The American court justified its ruling, that the lenders had reason to believe that the transfer was intended. Citibank did not notice the mistake it had committed until about a day after the transfer.
Jesse Foreman, a US District Court judge in Manhattan, confirmed that the financial transfers executed to the lenders of Revlon, on August 11, 2020, were final and complete transactions and not subject to cancellation.
Citibank described the mistake as a “banking mistake” that may be unprecedented in nature and scale.
The value of the amount transferred accidentally approaches the value of the syndicated loan, which will mature in full by 2023.
Citigroup announced its strong opposition to this decision, and that it intends to appeal against it.
The group said that it should get the funds back, adding that it would continue to seek a full refund.
The law usually penalizes those who mistakenly spend money deposited into their accounts. Unintended transfers are common in the digital age and can be paid for instantly.
However, New York law has exceptions to this rule. If the beneficiary is owed the money and he did not know that he transferred it by mistake, he can keep it.
The US court ruled the lenders were justified in believing the payment was intentional. Citibank itself did not realize the magnitude of its mistake until nearly a day after.
“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,” the court document said.