Citigroup Back To Federal Court Over $900M Error

Citigroup Inc. returned to court Friday (Aug. 21).

Reuters reported the New York-based multinational investment bank and financial services corporation filed its third suit in the U.S Southern District of New York Court to recoup $900 million it mistakenly sent to lenders of Revlon Inc.

While many firms returned the money at Citi’s request, the bank said in court documents, a dozen have been sued after what the bank called an “operational error” caused it to transfer $900 million of its own funds to Revlon creditors one day after the troubled cosmetics company was sued over its restructuring tactics.

“When Citibank discovered the mistake, it promptly asked the recipients to return its money,” the complaint said.

But Citi has reportedly used federal court to recover more than $500 million from lenders who are refusing to return the payment.

“Defendants have unreasonably and unlawfully attempted to capitalize on Citibank’s unfortunate error,” the complaint said.

On Tuesday (Aug. 18), the financial services giant filed suit to recoup $127.3 million from HPS Investment Partners LLC, the New York based capital solutions company, and $109.7 million from Symphony Asset Management LLC, the San Francisco research, valuation and risk analysis firm.

Citigroup alleges it transferred the money in error from its own accounts on behalf of Revlon, for whom it is acting as an agent for a loan involving dozens of creditors, including the big hedge funds.

On Monday (Aug. 17), Citigroup won a court order to freeze $175 million it deposited into the accounts of New York-based Brigade Capital Management LP, a third hedge fund that had also lent money to Revlon.

U.S. District Judge Jesse Furman ruled that Brigade isn’t allowed to touch the money. Citi asked for the money back, but Brigade Capital refused, unsure, it said, whether the payment was actually a mistake.

Brigade’s lawyer, Robert Loigman, said the payments could be presumed to be correct, due to the fact that they were in the exact amounts owed by Revlon.

Loigman argued it was “not believable that a sophisticated institution like Citi could have transferred nearly $1 billion, in the exact amount outstanding under the 2016 credit agreement, in error,”

Citi said it intended to send Brigade $1.5 million to cover interest payments on behalf of Revlon on a loan the hedge fund holds. But it transferred amounts more than 100 times the size intended.