Ebene News – CA – Epic $ 500 Million Bank Failure

Citigroup made one of the biggest blunders in banking history, accidentally losing nearly $ 1 billion last year

There is a “massive” gap between how much we need and what we have Here’s how much you should have

A federal judge refused to let Citigroup recover millions it says it accidentally paid to lenders of cosmetics seller Revlon last August Photo: Timothy A Clary / AFPSource: AFP

A federal judge on Tuesday refused to let Citigroup recover millions he says he accidentally paid to lenders of cosmetics seller Revlon last August linked to a loan due in 2023

Although he called the nearly $ 1 billion blunder “one of the biggest blunders in banking history,” Manhattan federal judge Jesse Furman ruled that the money that Citigroup accidentally wired to Revlon’s lenders on August 11, 2020 was “not subject to revocation”

Citigroup said it only intended to send a $ US7 8 million interest payment on the loan, and realized its mistake a day later To make matters worse, the money was coming from the own Citi vaults – no Revlon

While some of Revlon’s lenders quickly returned the money, ten asset managers holding some $ 501 million refused, including Brigade Capital Management, HPS Investment Partners and Symphony Asset Management

Citigroup then took legal action, claiming they should have known that a financially troubled company like Revlon, owned by billionaire Ron Perelman, would never pay off debts years in advance

The lipstick seller, who was pummeled by the coronavirus pandemic, narrowly avoided going bankrupt in November, making debts to Revlon an increasingly risky investment

A federal judge refused to let Citigroup recover millions it says it accidentally paid to lenders of cosmetics seller Revlon last August Image: Hollie Adams / The Australian Source: News Corp Australia

Citigroup has said it will appeal the ruling, and the judge ordered the $ 501 million frozen until the case is resolved

“We totally disagree with this decision and intend to appeal. We believe we are entitled to these funds and will continue to recover them fully,” Citigroup said through a spokesperson

By law, when money is transferred by accident, it must be returned But New York also offers an exception if the money sent pays a valid debt and the recipient was not notified of the error in right time

Internal chat messages provided by Citigroup suggest employees of at least some of the lenders were flabbergasted by Revlon’s sudden efforts to pay off all of its debt nearly two years ahead of schedule

One conversation, for example, showed an anonymous HPS employee mocking the poor Citigroup employee who made the nearly billion dollar blunder

“It was okay, except I accidentally sent ($ 900 million) to people who weren’t supposed to have it”

But Judge Furman, in a scathing 101-page ruling, ruled that the mega-bank is an institution large and powerful enough that lenders are correct in believing it was an “intentional” prepayment Adding to the confusion, the payment was ‘by the penny’ what was due, he said.

“To believe the opposite – 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 almost $ 1 billion – would have been bordering on irrational “

Industry groups warn move could expose banks to undue liability risks The Loan Syndications and Trading Association, of which around 530 members include Citigroup and some Revlon creditors, has said Judge Furman’s ruling could destabilize 1 country dollar2 trillion syndicated loan market

“This is a new solution,” said a corporate lawyer “Great for hedge funds I wonder if Citi is appealing to this by saying, ‘No, we were so incompetent’”

The move comes as Jane Fraser is set to take charge of the bank this month, becoming the first female CEO of a major US bank after Michael Corbat announced her retirement in September

According to reports at the time, the release of M Corbat was speeded up after it became clear that federal regulators were preparing a formal reprimand for Citi’s failure to upgrade the bank’s outdated technological systems that allegedly monitored transactions such as wire transfers

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Ebene News – CA – Epic $ 500 Million Bank Failure

Source: https://www.news.com.au/finance/business/banking/citigroup-cant-recoup-500-million-mistakenly-sent-to-revlon-lenders/news-story/3a53c8d9c8c6fd2cfd2f52af771bf76f