Citi Loses Court Battle Over $500MM "Fat Finger" Trade

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by Tyler Durden
Tuesday, Feb 16, 2021 - 10:35 AM

Some Citigroup execs are about to have some serious explaining to do to their shareholders (though fortunately for the bank, outgoing CEO Michael Corbat is still at the rudder to take the PR hit).

After more than a year of fighting, Bloomberg reports that Citigroup has officially lost the court battle to recover some $500MM that was accidentally transferred to investors in a Revlon debt deal.

Citigroup shares retreated (but remained in the green) on the news, which was first reported by Bloomberg.

US District Judge Jesse Furman said 10 asset managers for the lenders -- which include Brigade Capital Management, HPS Investment Partners and Symphony Asset Management - don’t have to return more than $500 million that Citibank said it mistakenly transferred in August while trying to make an interest payment.


Despite determining that the money Citi sent was "indisputably transferred by mistake," Judge Furman, a US district judge in Manhattan, wrote that he was bound by precedent to rule in favour of the funds. "Were the court writing on a blank slate," the judge wrote, he might have ruled in favour of Citi, given that the bank "realised its error and notified the lenders within one day." But New York law is explicit, and in the Empire State, a legal recipient may keep funds transferred by mistake if they pay off a debt, the recipient did not know of the mistake, and/or the recipient did not trick the sender into making the payment. Judge Furman said the recipients had good reason to believe the payments were intentional. "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 $1bn - would have been borderline irrational," he wrote.

We initially wrote about the issue last year, as it was becoming clearer that Citi's path to recovering the money might be legally fraught. Now, it looks like the bank will end up being stiffed for half a billion (earlier reports said the number at risk could be as much as $900MM) by a bunch of its clients.

As one twitter user pointed out, Citigroup is apparently eating its just desserts after helping corporate raider Ronald Perelman try to strip assets from Revlon.

Clients are ripping off investment banks, now? We thought that relationship was supposed to work the other way?