Citigroup has lost a legal battle to recoup almost $0.5 billion in wire transfers that were mistakenly sent to creditors of distressed cosmetics firm Revlon.
The screw-up happened after the bank mistakenly wired $893 million to Revlon’s lenders, appearing to pay off a loan not due until 2023.
Citi was midway through a project to replace obsolete software dating from the 1990s when a 'clerical error' resulted in the transfer of the full debt repayment, rather than the interest that was due on the loans.
While some lenders returned the money they were sent, at least ten asset managers refused to comply, leading Citi to take court action in an ettempt to recover its losses.
But in a court ruling in Manhattan, US District Judge Jesse Furman affirmed that the fat-finger transfers were “final and complete transactions, not subject to revocation”.
In a 101-page decision, Furman wrote: “The non-returning lenders believed, and were justified in believing, that the payments were intentional. 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.”
A spokeswoman for Citigroup told Reuters that the bank strongly disagrees with this decision and intends to appeal.
“We believe we are entitled to the funds and will continue to pursue a complete recovery of them,” the bank said.