Citibank Files Lawsuit After Its $900 Million Transfer Mistake

Citibank Files Lawsuit After Its $900 Million Transfer Mistake

Rabat – Citibank filed a lawsuit on August 17 against an investment fund to which the bank mistakenly paid $175 million, which refused to transfer it back.

Citibank in error made a $900 million transfer on August 11 to several creditors of American cosmetics manufacturer,Revlon, according to Bloomberg.

Citibank is an agent on the loan, collecting payments from Revlon and distributing them to its creditors, but the accidental transfer came from Citi’s own funds.

Among the recipients of the accidental overpayment transfer is Brigade Capital Management, which refused to respond to the complaint Citibank filed with a New York court and sent most of the funds back. The company received $175 million.

Citibank affirmed in its complaint that it intended to pay $1.5 million in interest Revlon owed to creditors.

The sum represents 100 times more than what the company intended to pay on behalf of Revlon.

In addition, Citibank indicated in its complaint that Brigade Capital Management is “well aware that no business … would make such a large prepayment while facing the major financial consequences caused by the pandemic.”

Revlon still has three years to repay the debt, and does not have enough funds to pay it all back immediately, according to Citibank‘s complaint.

Citibank made the August 11 transfer error shortly before Brigade and some of Revlon’s other creditors filed a lawsuit against the cosmetics company over its approach to restructuring debt.

The banking giant claimed a small victory on August 18 after a US judge ordered a freeze on the $175 million transfer.

The decision comes pending the court’s consideration of a preliminary injunction that might end the case by requiring Brigade to pay the extra funds back.

However, the legal proceedings to recover the mistake are likely to take a long time, according to Odeon Capital Group analyst Dick Bove.

“A payment error by the nation’s only truly international bank is likely to cause significant questions concerning the systems the bank is using,” he stressed.

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