One of the major mistakes made by a bank in history

Citbank error
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It was the biggest Wall Street mistake in years. And it triggered a heated argument between the monetary institute Citibank and the cosmetics manufacturer Revlon.

Now there is a verdict that forces all the banks to sit down and take note. The American banking giant Citibank CANNOT recover $500 million mistakenly transferred to mutual funds! A New York judge ruled on Tuesday. Citibank had “made one of the grossest mistakes in banking history,” wrote Judge Jesse Furman to justify his ruling.

Background: Citibank had accidentally transferred a total of nearly $900 million (the equivalent of 743 million euros) to the creditors of the cosmetics company Revlon last August. In fact, the bank that administered the loan only wanted to transfer interest of $7.8 million (6.4 million euros). However, the total amount of the loan, including interest, was paid. When the error was discovered, Citigroup demanded repayment, but only about $400 million (‘330 million) was repaid. Because ten investment funds quickly refused repayment. And Revlon’s board of directors, multi-billionaire Ronald Perelman (78 years old, the ex-husband of actress Ellen Barkin and the 103rd richest American), was delighted. The case ended up in court. The equivalent of about 413 million euros! Judge Furman has now ruled that under U.S. law, money transferred improperly must generally be refunded. BUT: New York State law provides an exception.

“The receiver might want to stay with the money if the goal is to pay debts. The recipient did not provide incorrect data to trigger payment, and the recipient couldn’t acknowledge their mistake,” the judgment states. In this case, the creditors assumed “in good faith” and with sufficient justification that Revlon had repaid the loan early from 2016. Between this assumption and the assumption that “Citibank or Revlon mistakenly transferred more than $900 million – something a bank has probably never done before and probably never will), it would have been almost irrational to assume the latter,” according to the Judge. Citibank firmly rejected the judgment and announced that it would appeal. Citibank is entitled to the money and will continue to campaign for full repayment, a spokeswoman said.

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